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MAPFRE MIDDLESEA p.l.c.
Annual Report
31 December 2022
Company Registration Number: C 5553
Contents

|  | Page |  | Page
| Chairman's Statement | i. | 4. Management of risk |
| President & CEO Statement | vii. | 4.1 Insurance risk | 100
| Directors’ report | 1 | 4.2 Financial risk | 105
| Corporate Governance Statement | 16 | 4.3 Fair values | 124
| Remuneration Statement and Report of the Remuneration Committee to the Shareholders | 36 | 5. Capital management | 128
|  | 6. Segment information | 129
|  | 7. Net operating expenses | 135
| Statement of profit or loss |  | 8. Investment return | 136
| Technical account – general business | 46 | 9. Other income | 138
| Technical account – long term business | 47 | 10. Profit before tax | 138
| Non-technical account | 48 | 11. Employee compensation | 139
| Statement of comprehensive income | 49 | 12. Tax expense | 140
| Statement of financial position | 50 | 13. Directors’ emoluments | 140
| Statement of changes in equity | 51 | 14. Earnings per share | 141
| Statement of cash flows | 55 | 15. Dividends | 141
| Notes to the financial statements |  | 16. Intangible assets | 142
| 1. Basis of preparation | 56 | 17. Leases | 146
| 2. Accounting policies | 75 | 18. Property, plant and equipment | 150
| 2.1 Consolidation | 75 | 19. Investment property | 155
| 2.2 Segment reporting | 77 | 20. Investment in subsidiary undertakings | 163
| 2.3 Foreign currency translation | 77 | 21. Investment in associated undertakings | 166
| 2.4 Intangible assets | 78 | 22. Other investments | 168
| 2.5 Property, plant and equipment | 79 | 23. Deferred income tax | 172
| 2.6 Investment property | 80 | 24. Insurance liabilities and reinsurance assets | 175
| 2.7 Investments in subsidiary undertakings | 80 | 25. Deferred acquisition costs – short term insurance contracts | 185
| 2.8 Investments in associated undertakings | 81 | 26. Insurance and other receivables | 185
| 2.9 Financial assets | 81 | 27. Cash and cash equivalents | 186
| 2.10 Impairment of assets | 83 | 28. Share capital | 186
| 2.11 Offsetting financial instruments | 85 | 29. Other reserves | 187
| 2.12 Cash and cash equivalents | 85 | 30. Provision for other liabilities and charges | 188
| 2.13 Share capital | 85 | 31. Insurance and other payables | 190
| 2.14 Insurance and investment contracts | 85 | 32. Cash generated from operations | 191
| 2.15 Financial liabilities | 91 | 33. Commitments | 192
| 2.16 Current and deferred income tax | 92 | 34. Contingencies | 192
| 2.17 Provisions for pension obligations | 93 | 35. Related party transactions | 193
| 2.18 Revenue recognition | 93 | 36. Events during the period | 198
| 2.19 Investment return | 94 | 37. Statutory information | 198
| 2.20 Leases | 95 | Independent Auditors’ report |
| 2.21 Dividend Distribution | 97 | Independent Assurance Report |
| 3. Use of accounting estimates and judgements in applying accounting policies | 98 |  |

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
Chairman’s Statement
With the passing of the pandemic, we were hoping for a return to normality. Indeed, in my
report last year I said that we were looking to the future with some optimism that the worst
may be over, and that we may again be able to return to normality after more than two years.
However, it seems that crises seems to be the new norm. 2022 saw global supply chain
issues, the war in Ukraine and subsequent sanctions on Russia, which contributed to further
uncertainty and worldwide inflation. The reaction by Governments and Central Banks to
combat this, including the slowdown and halting of quantitative easing and increasing the
interest rates, played havoc with the markets, resulting in another year of turbulence.
Towards the beginning of the year markets fell drastically, partially recovered and fell again
towards the end of the year. Whilst equities fell, the increase in interest rates caused a
corresponding fall in bond prices. As I write this report, the markets remain depressed and it
is difficult to predict whether these large fluctuations will continue or whether the world can
return to a more stable pattern of growth.
Other geopolitical turmoil may aggravate this state of uncertainty. Tragically, the war in
Ukraine does not seem to be moving towards any sort of resolution. On the wider stage, the
United States and China seem to be moving towards political confrontation. Refugees fleeing
war zones or oppressive governments or even the effects of climate change, contribute to this
instability as Europe struggles to have a coherent, yet humanitarian approach to this issue.
The local market was to an extent shielded from this and therefore the results of MAPFRE
Middlesea p.l.c. (“MAPFRE Middlesea”, “MMS” or “Company”), which deals in general
insurance, reflected this with profitability largely on track. On the other hand, MAPFRE
MSV Life p.l.c. (“MAPFRE MSV Life”), the life company which has a substantial
investment fund, was greatly affected by the performance of the markets which, even if this
has not significantly affected profitability, has impacted the performance of the fund as well
as putting pressure on solvency.
All in all, a complex situation which I shall endeavour to explain further.
Results
The consolidated results show a profit before tax and minority interests of €22.2 million.
MAPFRE Middlesea made a profit of €6.0 million (compared to €4.1 million in 2021) whilst
MAPFRE MSV Life made a profit of €17.2 million (compared to a profit of €16.7 million in
2021). This is before tax and minority interests. The seeming excellent results belie the
complex effects brought about by the markets, principally on the life company.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
i
Chairman’s Statement - continued
Results - continued
MAPFRE Middlesea’s results reflect the Company’s ability to retain its market share of the
underwriting market in General Business. Turnover increased from €80.1 million to €87.1
million and the market share dropped marginally to 32.57%. 46.7% of this turnover remains
in motor where the net combined ratio was 99.8%. This is a far cry from the ratio of 89.3%
enjoyed during the height of Covid and to an extent the increase was not unexpected as use of
vehicles returned to normal levels. However, the ratio is deemed high and the Company is
taking steps to correct this not least through increasing policy rates to sustainable levels and
through de-risking the motor portfolio. It should be noted that the value of claims is
increasing and the safety standards on our roads is far from satisfactory, as witnessed by the
record number of mortal accidents in 2022. We join the Malta Insurance Association in its
appeal to Government to take firm steps to reduce the number and extent of accidents on our
roads.
We are pleased to report the increasing level of health and home policies. Health and Home
business is important to allow the spread of risk and ensures we maintain a balanced
profitable portfolio.
MAPFRE MSV Life returned a record profit this year. However, this belies the complexity of
the result. The share of term business, which represents the life protection segment accounted
for 32% of these profits. The major part of the result however, some 65% is from With-
Profits Fund, which is underpinned by single and regular premium business. The With-Profit
Fund’s flagship product unique characteristics are to provide policyholders with smoothen
returns over the term of the policy and a capital guarantee on the invested amount and any
declared bonuses, upon death or policy maturity.
MAPFRE MSV Life applies an Annual Management Charge (AMC) on the With Profit
fund’s assets under management (AUM) and consequently the returns depend on the size of
the fund rather than the investment return generated by the fund. As at the year-end the With
Profits Fund’s assets under management stood at €1.89 billion (2021 €2.25 billion).
The With-Profits Fund’s investment portfolio is broadly diversified across asset classes,
namely equities, bonds and property, and geographies. Notwithstanding, the unusual
concurrent fall in equity markets and bonds, as interest rates moved significantly higher, led
to a negative return of 13.1%, which obviously impacted the With Profits Fund adversely.
From a solvency perspective, this affects the solvency capital requirements and hence the
reported solvency ratio of the company. At the end of 2021, the company’s solvency ratio
stood at 226.1% whilst as at year-end 2022 the solvency ratio is estimated to remain above
the regulatory solvency capital requirements but not within the desirable range as articulated
within the risk appetite of the company. The company will continue to monitor its risk profile
in the context of the prevailing market situation and outlook and act accordingly. I am sure,
you will appreciate the company’s cautious outlook particularly at this time of uncertainty.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
ii
Chairman’s Statement - continued
Results - continued
The bonus payout has been set at 0.90%-1.00% compared to 1.90%-2.00% last year which
again was affected by the poor performance of the markets. This must be seen in the light of
those who invested in the capital markets where investors suffered capital losses as both
equity and bonds experienced falling prices but without the benefits enjoyed by With-Profits
policyholders. We believe the With Profits Fund will continue, over the long term, to meet
policyholders’ reasonable return expectations through smoothed returns and peace of mind
given through the capital guarantee as outlined in the terms and conditions of the product.
On the other hand, the company continues to make progress in sale of unit linked products as
well as making inroads in the pensions market. With regards to the latter, it is important for
people to understand the importance of having a pension plan which helps them achieve the
desired standard of living after retirement. I am pleased to report that over 36 companies have
chosen MAPFRE MSV Life p.l.c.’s WorkSave Pension Scheme for their Voluntary
Occupation Pension Scheme (VOPS) for the benefit of their employees apart from around
14,000 individual pension policies. The company sees this as an important growth area which
is slowly gathering traction.
Dividends
MAPFRE Middlesea is declaring a net dividend in respect of the profit earned in 2022 of
€3.5 million, which translates into a net dividend per share of €0.038043. This compares to
the dividend declared last year of €2.4 million.
Whilst a dividend of €1.0 million has been received from MAPFRE MSV Life during 2022,
which is being distributed as part of the dividend above, the life subsidiary will not declare
any dividend for the financial year ended 31 December 2022 given the diminishing solvency
ratio expected to be published in the coming weeks. MAPFRE MSV Life’s priority is to
ensure that its equity remains at a level that can guarantee an adequate solvency level in these
most uncertain economic times whilst being able to develop its strategy for the future.
Solvency
In these difficult times, the Company has been focusing on its solvency requirements. Under
Solvency II, through the standard formula, the Company forecasts the solvency requirements,
that is, the ability of the group companies to continue to function at the same level of
business even in the event of a 1 in 200 year event. These calculations are further stressed to
withstand a more frequent 1 in 10 year event (such as large fluctuations in share prices,
severe claims and general deterioration in loss ratios).
As at year-end the solvency ratio for MAPFRE Middlesea is expected to close below the
257.9% of 2021 after deducting the dividend that is being proposed. As noted, the board
closely monitors solvency in these uncertain times and takes appropriate actions to ensure
that we remain well within our risk appetite.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
iii
Chairman’s Statement - continued
Regulation
The burden of regulation continues unabated. As a Group, which remains systemic to the
Maltese economy, we remain under the spotlight of the Malta Financial Services Authority
("MFSA"). Nonetheless we remain committed to best practice and ensuring that our
regulatory departments remain well-resourced and manned by highly skilled employees.
In 2022, we focused on the impending implementation of IFRS 17. This is a seismic shift in
the way profit, as well as insurance assets and liabilities, are measured and reported in
insurance undertakings, especially in long-term business. IFRS 17 comes into play in 2023
and the first results under this regime which will be reported to you will be the interim 2023
results. At this stage, I am unable to give you exactly what the impact on profitability and
balance sheet values will be, both for the Company and the Group. This is entirely due to the
way assets and liabilities as well as profit will be calculated and presented under the new
standard, and not due to any change in the business.
Operational developments
Both companies in the Malta group have spent considerable energy and resources
implementing core IT systems. I am pleased to say that finally we are at an advanced stage.
We should have the majority of the business of both companies on the new IT systems by the
middle of the year. With MAPFRE Middlesea this has been a very long journey, I would say
too long, but the benefits we will reap having systems which allow us to manipulate data to
assist our actuaries in their calculations, helping to properly calculate reserving, and ensuring
correct pricing, are immense. The front end will also allow for better client experience and
faster onboarding. It will also allow us to nuance our pricing based on risks to a much greater
extent than previously, making the Company more agile as well as more competitive.
On the motor side, we are analysing data from different sources to ensure correct pricing as
well as the reduction of risk to bring the combined ratio to more profitable levels. Of course,
we are in the business of taking on the risks of our clients and therefore, whilst predictions
are fraught, the more scientific we are, the probability of achievement of this goal increases.
MAPFRE MSV Life is also in the process of migrating to a new core IT system which will
enhance its operational capability. This process will be largely completed this year.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
iv
Chairman’s Statement - continued
Distribution
MAPFRE Middlesea has some 6 agents, over 60 tied insurance intermediaries and we also do
business through 23 brokers. Only 10% of our business is written directly by us. Our agents
and Intermediaries are often the face of our business and we are grateful for their efforts in
helping us grow the business, whilst maintaining the professional image of the Group. The
insurance industry has become more technical, and considerably more regulated. This means
there is more training on compliance, and anti-financial crime, which combined with the roll
out of the new IT systems, next year will continue to burden our distributers. I should like to
place the great thanks of the Board and staff of the Company to our distributers for their
loyalty, professionalism and dedication to their work. It is teamwork and I promise we will
continue to improve our products, as well as our systems and procedures, to provide the
support that is required.
With MAPFRE MSV Life, Bank of Valletta p.l.c. (“Bank”) remains by far the single largest
producer for the company, both in terms of term assurance as well as Single premium
products. The Bank has proved to be an excellent partner, as well as shareholder in the group.
I cannot emphasise the importance of the Bank to the Malta group, which has in no small
way contributed to the results of the group. This is a partnership which has stood the test of
time and has delivered results for customers and shareholders alike.
MAPFRE S.A.
MAPFRE Middlesea is a subsidiary of MAPFRE Internacional S.A. who in turn is a fully
owned subsidiary of MAPFRE S.A.. Since 2011, when the Company became a MAPFRE
Group company, it would be difficult to describe the transformation it has gone through.
They have brought a new level of expertise in the increasingly complex business of
insurance, which has allowed us to maintain our lead in the market.
Corporate Social Responsibility
During 2022, MAPFRE Malta once again met its CSR objectives collaborating with a
number of different entities to organise various activities ranging from food and blood
donations, environmental activities and various donations to various charitable organisations
and NGOs such as Malta Community Chest Fund, Malta Trust Foundation, Majjistral Park,
Malta Red Cross Foundation, Fondazzjoni Patrimonju Malti and Down Syndrome
Association, to mention a few.
Fundación MAPFRE allocated over €160,000 for projects in Malta across different areas
(road safety, health, and social actions). The Foundation has once again collaborated with
Inspire and Equal Partners Foundation, funding the provision of specialised services to
children and adults with disabilities (€53,000 to cover the running costs of Inspire’s
therapeutic facilities Multi-Sensory Rooms and over €30,000 to Equal Partners Foundation to
support their efforts to enable children who suffer from a disability to lead a more
independent life).
MAPFRE Malta also joined the fight against breast cancer with a variety of awareness-
raising activities through their #ThinkPink campaign, as well as by collaborating with the
Action for Breast Cancer Foundation as per previous years.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
v
Chairman’s Statement - continued
Shareholders
MAPFRE Middlesea p.l.c. is a listed entity regulated by the MFSA. It is a subsidiary of
MAPFRE Internacional S.A.. Being part of one of the largest insurance companies in the
world allows us to access technical knowhow which is at the cutting edge of the industry. In
2022 MAPFRE Internacional S.A. has a shareholding of 55.83% in the Company.
Bank of Valletta p.l.c. is the other major corporate shareholder with 31.08% of the
shareholding and is a 50% co-shareholder in MAPFRE MSV Life p.l.c.. The Bank has
proved to be a steady partner throughout the years, providing not only input and insight at
board level but is the main generator of turnover in MMSV. The commercial relationship
between the Bank and the company remains very strong which is critical to the evolution of
the company.
13.09% of the shareholding in MAPFRE Middlesea is held by the so-called smaller
shareholders, of which we have some 3,720.
I have the privilege to work with a board which is professional in its dealings and technically
competent. Jose Ramon Alegre, Jose Luis Jimenez, Etienne Sciberras and Jose Maria del
Pozo were appointed by MAPFRE Internacional S.A. whilst Gordon Cordina and Robert
Suban were appointed by Bank of Valletta. The smaller shareholders elected Antoinette
Caruana and Paul Testaferrata Moroni Viani. I am grateful to them for their focused insight
in helping to resolve the many issues which arose during the year and in providing direction
and perspective to management. I need to pay tribute to Joseph F.X. Zahra who retired at the
last Annual General Meeting. Mr Zahra has been a director of the Company for many years
and indeed was a past Chairman, in the more difficult times. The Company owes him a great
debt. I am pleased to inform you that he has been appointed a director of MAPFRE MSV
Life where we have been able to retain his considerable knowledge and acumen. Taddeo
Scerri and John Cassar White also retired last year and I thank them for their support and
contribution during their tenure.
2021 saw the appointment of new CEOs Javier Moreno at MAPFRE Middlesea and Etienne
Scibberas at MAPFRE MSV Life. They joined at a time of uncertainty and change and have
done an excellent job in guiding the company in unchartered waters throughout 2022.
It is also fitting to record our thanks to James Mallia our CFO who was acting CEO for a
period when Javier Moreno was indisposed. He was a steady hand on the tiller bringing his
vast experience and calm to the fore when needed. The Company is ably supported by the
whole team of Chief Officers and staff who have ensured the Group’s continued progress in
these unprecedented times. I join my fellow directors in thanking them for the hard work and
commitment during the past year.
Signed by Martin Galea (Chairman) on the 22 March 2023
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
vi
President & Chief Executive Officer’s Statement
MAPFRE Middlesea Group highlights
A year ago I remember that I began my annual report by stating that 2021 had been a
complex year in our lives. At that time we were not yet aware of the new and unexpected
circumstances that were going to turn 2022 into another turbulent year: we have faced very
significant geopolitical instability with a more direct impact on Europe, very volatile
financial markets, high interest rates, inflation with increases not seen in the last 40 years, all
circumstances that have a direct impact on our insurance activity.
On the positive side, the situation regarding the Pandemic, although not over, has stabilised in
most of the world, turning towards a chronic situation that does not limit work and
commercial and social activity.
As always, our objectives as MAPFRE Malta Group (“MAPFRE Malta”, “Group”) have
been focused on offering the best service to all our clients, intermediaries, strategic partners
and other stakeholders, while maintaining the best possible performance in this complex
environment, rigorously executing our commitment to profitable development. All this
without ever forgetting our care for all our employees, undoubtedly one of the great strengths
of our Group in Malta.
In the times we live in, rigid strategies are no longer appropriate and therefore adaptation and
flexibility become strategic values in their own right. In MAPFRE Malta, we have combined
in an adequate way the development of reactive measures to mitigate the different impacts
generated by the difficult global situation.
Our financial performance has been very positive and even more so in the current
circumstances, maintaining our position as the insurance leader in general insurance as well
as in life and pension insurance. This has only been possible thanks to the efforts and
commitment of all our employees, strategic partners, intermediaries and suppliers.
Premiums written amounted to €335.9 million, with a different evolution based on the type of
business, clear growth in Non-Life in almost all products and selective growth in Life, with a
focus on regular premiums, pensions and protection in contrast to some slowdown in the
single Premium line. Details of these activities are provided below.
Importantly, the consolidated result before tax was excellent at € 22.2 million and very
positive in both companies. We have exceeded the 2021 result and even the internal targets
we set ourselves for this year.
I n the Non-Life business, we should point out that commercial activity has been very strong,
and we have been able to contrast the recovery of the travel business as well as greater
mobility, despite the fact that this has brought about additional stress in the Motor line, due to
an increase in the frequency of accidents.
Thus, the Premium written figures for MAPFRE Middlesea p.l.c. (“MAPFRE Middlesea”,
“MMS”, “Company”) including group life reached a total of €87.1 million at the end of 2022,
generating an increase of 8.7% over 2021, undoubtedly a relevant growth in an uncertain
year. The result was also remarkable, with a profit before tax of €6.0 million, clearly better
than the €4.1 million obtained in 2021, even if one had to exclude the €0.5 million reversal of
impairment in relation to Progress Assicurazioni S.p.A..
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
vii
President & Chief Executive Officer’s Statement - continued
MAPFRE Middlesea Group highlights - continued
In any case, technical performance remained resilient, with a Net Combined Ratio ("COR")
for non-life business of 92.6%, slightly higher than in 2021 but robust especially if we
consider the aforementioned circumstances of higher claims frequency and cost increases due
to inflation. Once again, our diversification strategy has contributed to generate a good
technical result, with some lines of business performing better than others do but with an
adequate mix.
Regarding the long-term business, volatility was even higher than in 2021, with very
challenging international and local financial markets and asset depreciation that led us to take
decisions aimed at protecting both current policyholders and the solvency of the Life
Company, MAPFRE MSV Life p.l.c. ("MAPFRE MSV Life”, “MMSV”). These are
discussed in more detail later in this report.
On balance, this year has been very positive in terms of results and adequate in terms of the
growth of the business lines that contribute most to the future sustainability of the group in
Malta and consistent with our strategy of sustainable and profitable development.
We have once again experienced challenging circumstances, which we have been able to
manage appropriately. The great assets of our Group have once again proved to be the key to
our clients' trust and we continue to maintain and reinforce a leading position in the insurance
industry in Malta.
We again reassert our commitment to strong, sustainable development and value creation for
our shareholders.
Finally, it is important to note that despite the difficult labour market, we have managed to
maintain great stability in our management teams, as well as in our governing bodies.
Undoubtedly a key support for the achievement of our objectives.
General Business
Premiums in 2022 reached €84.4 million, representing an increase of 8.8% over 2021; we
have made a constant effort to keep on the growth that we have enjoyed in 2021.
Preliminary figures show that, although maintaining the market leadership in the non-life
business, our growth rate was slightly lower than that of the market, leading to a marginal
reduction in our market share from 33.24% to 32.57%, remaining well balanced across the
major lines of business.
We have achieved clear growth in premiums written in all business lines except Marine Hull
and Engineering, the first case due to restricted underwriting and the second because of the
reduction of major new projects in this activity in comparison with 2021. Motor and travel,
still affected in 2021 due to Pandemic, showed a good recovery in premium volumes this
year. Of note was the magnificent and recurrent result in health, and the consistency of the
rest of the personal and commercial lines.
With just over 127,000 customers and more than 224,000 policies, we remain as the major
player in the market. These figures are undoubtedly one of the most important for MAPFRE
as they show that we continue to have the support and trust of our clients.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
viii
President & Chief Executive Officer’s Statement - continued
General Business - continued
Commercial activity has been even more intense than in 2021 and 67,419 new policies have
been issued, a significant figure that has been possible thanks to our large distribution
network and the attractive value proposition that the Company offers to its clients. It is worth
mentioning that the growth in the number of policies and policyholders in Health and Travel
have been particularly significant.
Our policy retention ratio is 79% and our client’s retention ratio, above 85%, remain in a high
standard in general terms although not enough for us as we see some clients leaving the
Company. Our ambition and business culture must drive us to consistently keep our
customers satisfied, loyal and open to placing greater trust in us with more insurance
products.
Regarding our product offering, MMS has continued working in adapting concrete solutions
for real life, examples are the upgrade of travel, commercial home, business combined
solutions and specific promotions on home, health, SMEs and motor. We reiterate MMS has
the widest coverage of insurance solutions that allow our intermediaries and sales force to
meet the needs of each family, company or organisation.
Regarding our distribution, we had the opportunity to be even closer to our intermediaries as
the face-to-face relationships came back, acting with all of them in a very proactive approach
to better fit real client’s needs. Our partners, brokers, agents and TIIs have demonstrated once
again that a relationship based on mutual trust and commitment is the basis for excellent
service to our clients, offering agile and personalised attention.
On top of this, as part of our value proposition, clients who bundle their insurance
requirements with MMS will not only get a cost saving but also enjoy additional benefits.
Our agents have developed a formidable year, showing that this model generates profitable
and sustainable growth. They have increased premium by 10.9%, a remarkable figure, and a
significant contribution to the diversification that is always part of our strategy.
MMS has always maintained an excellent professional relationship with brokers and this year
has been no exception as the strong figures show. Considering Commercial lines,
Reinsurance restrictions and higher costs are generating more complexity as this type of
business requires more protection capacity to meet concrete customer´s needs.
Our direct business, consisting of our regional offices and TIIs, has also performed very
positively. As a Company, we want to continue to promote this channel further as we still see
more potential to be opened up. MMS continues to develop this channel and during 2022 we
have been reviewing the current model to gain efficiency and working with actual partners to
establish the right plans with them for delivering higher sales figures in the coming years.
Important to note the excellent satisfaction level reported by our clients when they are
serviced by our offices, 6.5 out of 7 is the score we got here.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
ix
President & Chief Executive Officer’s Statement - continued
General Business - continued
Motor business evolution this year was extremely complicated by two factors: higher
frequency of claims due to major mobility of the population, and a strong increase in the
average cost of claims associated with inflation. The net COR reached 99.8%, slightly better
than the one got in 2021. Management has defined a specific motor plan during the year that
we will continue to action and monitor closely its development during 2023. Analytical
capabilities have been improved during this year through enhanced data extraction.
Health business performed very well with net COR holding at a very positive 74.9%, even
better than in 2021 and becoming strategic for the Company.
The rest of the business lines had a net COR of 90.8%, with a small deterioration from last
year mainly due to several large claims on the liability products, partly offset by an excellent
behavior of Marine Hull business.
With Motor business weighting 48% of the non-life portfolio, the diversification of
businesses ensures greater stability in our technical performance.
Special mention should be made of the high control of management expenses, although we
had to deal with a significant pressure coming from staff costs and IT projects.
With a headcount at the end of 2022 of 177 employees, MMS has suffered a variation of
2.3%, with a turnover of 10.4%, a very good outcome when we compare with the market for
financial institutions that is close to 30%. The commitment to our employees and society
remains unchanged and embedded in our corporate culture and this is a strategic pillar for the
coming years as we face a difficult labour market, with very low levels of unemployment,
rising wage pressure and high mobility in the market.
The solvency of MMS, as provisionally determined by Management, continues to be very
high, and although expected to be lower than that for 2021 will remain more than double the
minimum legal requirement. On top of this, the reinsurance protection offered to the
Company by MAPFRE Re, the MAPFRE Group reinsurance company, ensures an adequate
cover for significant losses that ensures that our Solvency is not negatively impacted by such
occurrences. Taking advantage of the MAPFRE Group purchasing power ensures that such
cover is obtained at an optimal cost for the Company, especially when the reinsurance market
is on a hard side due to big losses happening worldwide.
Investment return, at a negative €0.2 million excluding Group dividends of €1.3 million, is
conditioned by the negative adjustment of the valuation of our main real estate investment,
Development House, marginally offset by the rentals from tenants. The performance of our
financial investments in a negative environment did not help.
On a different note, we received a final amount of € 0.54 million from the liquidation of our
old Italian subsidiary Progress Assicurazioni S.p.A..
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
x
President & Chief Executive Officer’s Statement - continued
Long Term Business
MMSV offers a wide range of protection, savings, investments and retirement solutions
addressing the diverse needs of individual clients, companies as well as other organisations.
Undoubtedly, 2022 shall be remembered for the war in Ukraine and the surge in inflation to
levels last seen decades ago. Global Central Banks responded through an aggressive
monetary tightening policy to try and bring runaway inflation under control. Economic
forecast started to project a recessionary environment while capital markets became
increasingly more volatile. For the first time in many years, mainstream asset classes, equities
and fixed income securities, did not provide the traditional diversification benefits. In
general, balanced investment portfolios saw negative double-digit returns.
Against the backdrop of negative consumer sentiment and low investors’ confidence,
MMSV’s gross written premium saw a drop of 23.5% when compared to 2021, which was a
record year in terms of premium. In 2022, MMSV’s gross written premium was of €248.8
million compared to the €325.1 million registered in 2021.
The reduction in premium was mainly driven by the With-Profits single premium business
which saw a lower demand due to the current uncertain environment, measures taken to
protect the With Profits fund and ensure fairness across its policyholders. With the rise in
interest rates, the competitive landscape for investment solutions continued to intensify.
Compared to 2021, both With-Profits and Unit Linked regular savings premiums increased
on positive and encouraging demand for pension products. Protection premium was broadly
in line with expectations.
Funds under management decreased to €1,895 million, a decrease of 16% over 2021, driven
by With-Profit's maturities and a negative investment return of €270.4 million, representing a
negative gross investment return of 13.1%.
Operating expenses were 3.9% below 2021. This was mainly due to the lower acquisition
expenses from new business which compensated for the increase in internal expenses.
The lower contribution towards profitability from With-Profits business due to lower Assets
Under Management was partly offset by the protection business delivering an excellent
technical result, strongly supported by an improvement in interest rates, mortality experience
and improved reinsurance terms.
As a consequence of the above, MMSV's profit before tax reached €17.17M, exceeding the
2021 corresponding figure and contributing decisively to Group consolidated results of over
€22.2 million.
The fall in asset values together with a change in the tax treatment in the Solvency balance
sheet contributed to the deterioration in the reported solvency ratio. The solvency ratio, as
provisionally determined by Management, is expected to drop significantly remaining above
the regulatory requirements. The company continues to closely monitor and consider options
to strengthen its solvency position in line with its risk appetite.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xi
President & Chief Executive Officer’s Statement - continued
Consolidated Results
In 2022, the group registered a profit before tax of €22.2 million, 8.9% higher compared to
the previous year. After tax, the Group generated a profit of €14.7 million or 13.5% higher
than the previous year. The tax expense of 2022 is less than the 35% corporate rates closing
at 33.9% compared to 36.6% in the previous year due to a lower impact of Property gains that
are taxed at 10%. Earnings per share attributable to shareholders have increased to 9c6. The
profit attributable to shareholders increased both from a better technical result from MMS
and MMSV and from a one-time amount recovered from the liquidation of Progress
Assicurazioni S.p.A.. MMS is committed to returning value to its shareholders and will
continue to dedicate an important part of its profit to remunerate the shareholder.
Whilst still maintaining a prudent policy in line with discussions with our regulator, MMS
will propose to the board of directors to pay a net dividend of €0.038043 per share. The
Company's payout will be 92.37% of this year’s profit after tax of the Company.
In parallel, we continue to increase the value through both companies’ capitalisation to
manage stressed scenarios as we still face complex years with significant levels of
uncertainty.
Statements of Financial Position
The group's total assets reduced by 12.8% and totalled €2.47 billion. More than 91.5% of
them are return-seeking assets (investments and cash and cash equivalents) mostly within
MMSV’s funds under management that suffered a sharp drop in 2022. These funds are
invested in diversified securities (local and foreign), and are managed in-house or externally
by highly reputable entities. The Group also has a portfolio of rented property investments
and property-related shares.
On the liabilities side, 96.2% of the balance pertains to technical provisions. Life technical
provisions shrank as a result of negative investment returns and outflows exceeding inflows
into the Fund, whilst non-life business saw an increase both in unearned premium provision
from increased sales and in claims outstanding provision from higher claim frequency and
severity.
Total equity increased by €3.3 million or 1.5% including the minority with the profit for the
year mostly outweighed by the drop in the value of the in-force business and the dividends
paid.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xii
President & Chief Executive Officer’s Statement - continued
Review of operations
During 2022 MAPFRE Malta has continued to drive forward its omni channel approach,
introducing improvements across the board. At MAPFRE, we want to accompany clients and
engage with them based on their preferences. This is a reality as we provide attention and
services through our website, contact center, direct offices, TIIs, agents and brokers.
Starting with the website, www.mapfre.com.mt, after the integration we did last year, we saw
an intense traffic of clients going through. This provides the customer with a global vision of
the solutions and services that our Group offers in both Life and Non-Life, undoubtedly the
widest insurance offer in the country. We continue to promote direct services to
policyholders to make regular processes, such as quotations, renewals, and notification of
claims, easier and simpler.
Our customer portal ‘My Insurance’ gives, among other services, access to the excellent
offers of MAPFRE’s Insure&Save (https://www.mapfre.com.mt/insure-and-save/), the
loyalty program created solely for the benefit of our clients, definitively delivers additional
value for money when you decide to be part of the MAPFRE community.
The MAPFRE contact center performed through our associate company MAPFRE Middlesea
Assist Limited, has been already fully digitalised and it´s our flagship service on behalf of the
customers to deliver all kind of services related to their policies, as the roadside assistance or
the home assistance.
The experience of our customers is always key for us, that is why we have turned to our NPS
(Net Promoter Score) survey where, despite the good results obtained, we have analysed
those points that obtained a lower score in order to implement specific action plans to
improve.
We constantly strive for greater operational efficiencies, which is why more operational
processes have been optimised this year with 2 additional Robotic Process Automation
technology.
In 2022, we continued executing organisational adjustments recruiting specific new joiners
with special skills to strengthen the technical functions and those that are shared between
MMS and MMSV. It is important to mention the creation of a data office to help MAPFRE
Malta to be a totally data driven insurer. Other areas with additional reinforcement have been
Anti Financial Crime, IT and Business development.
Regarding digital transformation, progress in the implementation of the new core systems of
both companies has been rolled out to the Tied Insurance Intermediaries and Brokers.
Currently, the main products of both companies can now be issued through the new
platforms, providing underwriting and operational improvements and a solid pillar on which
to build the digital ecosystem of the companies. Customer experience remains in the center of
all our technological projects.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xiii
President & Chief Executive Officer’s Statement - continued
Subsidiaries and Associates
BEE Insurance Management Limited
BEE Insurance Management Limited (("BEE") and Euromed Risk Solutions Limited, our
subsidiaries dedicated to the provision of insurance services to third-party companies, have
managed to maintain business with their existing clients, with a good progress in terms of
new potential clients which unfortunately requires time to onboard them as final clients.
Due to these circumstances and the pressure coming from staff costs, the company is not
registering the profitability that one would expect on the third-party business. Nevertheless,
we continue to explore new opportunities that will allow us to maintain the sustainable
development of this activity within MAPFRE Malta.
Apart from third-party business, BEE also started providing IT services to the MAPFRE
Malta Group insurance companies during 2022, gaining more efficiencies as a unique
qualified team.
Middlesea Assist Limited
MAPFRE Middlesea Assist Ltd, our joint venture between MMS and MAPFRE Asistencia,
generated a profit of €0.19 million, an increase of 6.3% compared to 2021.
Its principal role is to be MAPFRE Malta's arm in developing services for our clients. As a
leader in roadside and home assistance services, it is perfectly aligned with our service ethos:
we prefer to solve our clients' problems rather than pursue a compensation process. Once
again this year, the evaluation of these services has been highly rated by our customers and
we have finalised the digitalisation of services with the MIA (MAPFRE Intelligence
Assistance) Drive project, which allows smartphone access to the assistance service.
Middlesea Assist continues to develop its telephone customer care services, also using
WhatsApp. But our bet for technology and automation for the benefits of our clients is fully
committed.
When people come first
We are by your side, accompanying you so that you can progress calmly, contributing to the
development of a more sustainable and caring society. We take care of what matters to you.
Because our reason for being is to work every day giving the best of ourselves, always being
close to our clients. Prepared to support them and offer what they need today and what is to
come tomorrow, as we have been doing for many years. Because, in an uncertain world, we
are defined by the capacity of all our employees, collaborators and suppliers providing the
best service, innovating, adapting to customer needs and being there when they need us.
Because for us, trust is the basis of the relationship with our customers and other
stakeholders. At MAPFRE, we want to give people confidence so that they have security,
strength and the ability to meet their goals and objectives. We will be by your side, providing
the necessary peace of mind so that no unforeseen event can stop us. We put all our
knowledge, experience, innovation and capacity at the service of our clients, so that they can
move forward and enjoy their lives to the fullest.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xiv
President & Chief Executive Officer’s Statement - continued
When people come first - continued
Also, our way of doing things is different. Our values and our commitment translate into a
permanent concern for the development of the communities where we operate. The ultimate
mission of our Company is to generate shared value with society. In short, carrying out our
activity based on a commitment to our environment and to people, with a long-term vision,
working for the improvement of society as a whole. We cannot carry out our business activity
without working in parallel for a more sustainable and caring world.
We are actors of social commitment through Fundación MAPFRE activities. We continue
supporting different organisations in Malta to help people in need. Providing training for the
young generation is key for us and we want to play a main role in road safety, whether they
are pedestrians, cyclists, drivers or passengers, because every person using the road plays an
important role on it. Following the success of the Street smart campaigns in schools,
Fundación MAPFRE partnered with Malta Public Transport (MPT), the Ministry for
Education and the Road Safety Council and introduced a new project in all schools via
interactive videos on road safety using real-life situations.
Fundación MAPFRE has also continued the very successful campaign called Logging Off.
The campaign is aimed at raising awareness about internet addiction among school children.
The campaign is composed of workshops streamed live into a classroom via interactive
whiteboard technology. This way students receive a fun and interactive lesson on healthy
interaction with the online world.
During 2022, Fundacion MAPFRE has also continued its support to Inspire Foundation,
through a generous donation that allowed specialised services for children and adults with a
disability by covering the running costs of one of Inspire’s therapeutic facilities – the Multi-
Sensory Rooms (MSR).
Our volunteers have been involved in activities that have benefited many people with a
helping hand whenever possible. Also taking care of the environment by planting thousands
of trees at Majjistral Park.
MAPFRE Malta also collaborated with a number of different entities to organise various
activities ranging from food and blood donations, environmental activities and various
donations to various charitable organisations and NGOs, such as Malta Community Chest
Fund, Malta Trust Foundation, Malta Red Cross Foundation, Fondazzjoni Patrimonju Malti
and Down Syndrome Association, to mention a few.
MAPFRE is a committed Company that is concerned about its social print and fosters
economic and social development in the countries in which it operates. MAPFRE believes
that business development also entails a demanding social, environmental and governance
commitment to protect the legacy handed down to our future generations.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xv
President & Chief Executive Officer’s Statement - continued
When people come first - continued
ESG is high on everyone’s agenda, and means using Environmental, Social and Governance
factors to evaluate companies on how far advanced they are with sustainability. At MAPFRE
Malta this is already deeply embedded in our strategy and in our commitment to society here
at MAPFRE Malta. We take specific action on environmental sustainability, in society and
governance. We are not starting from scratch, these activities were already part of our
corporate DNA and were already present in our daily business, but now we will promote
them more directly and visibly.
Managing the social and environmental impact of companies and people is closely linked to
our activity. Sustainability is strategic for us because each pillar of our plan allows us to
continue moving forward and fulfilling our purpose. At MAPFRE Malta we take care of what
matters to you, and our Sustainability Strategy allows us to continue doing so.
This plan goes hand in hand with our strategy in a fully integrated manner in the business,
especially in the development of products and services, and it determines the responsible
management of our assets and investments. It also produces transformative effects, both in
relation to the environment and in the Group's corporate governance; but what makes us
different lies in the “S” for Social, because it is part of our way of understanding business.
We are expanding MAPFRE's ambition and commitment to advance in the decarbonisation
of the economy and in reducing all kinds of gaps, as well as helping our clients make a fair
transition for the generation of people that now depends on less sustainable activities.
We are aligned with MAPFRE Group’s sustainability plans on emissions neutrality by 2030,
inclusive labour policies for people with disabilities making up at least 3.5% of the
workforce, working towards having 100% sustainable providers, and not investing in, or
insuring, coal, gas or oil companies that do not have an energy transition plan in place.
We continually review and increase our transparency and ESG requirements based on what
others expect of us, and on what we believe ourselves to be capable of doing to contribute on
social and environmental matters. At MAPFRE Malta, we are aligning our services and
products with these aims. We achieve this through sustainable products, sustainable
investment, and sustainable underwriting. In 2022, MAPFRE Middlesea launched the first
electric vehicle insurance policy on the island and MAPFRE MSV Life was the first
company to launch ESG funds linked to their investment portfolio.
In July 2022 we joined MESGA, Malta ESG Alliance, to become an active player in
conjunction with other relevant companies in the country and fostering initiatives from the
private sector that may accelerate the sustainability of Malta. At MAPFRE Middlesea we will
be investing in solar panels to reduce our carbon footprint and we have implemented many
initiatives to optimise waste management.
At MAPFRE Malta we are fully committed to the 2030 Agenda and we believe that we are
playing a key role in transforming the present to ensure a fairer, more egalitarian, and safer
world for all.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xvi
President & Chief Executive Officer’s Statement - continued
Looking forward
MAPFRE has a long history of being an innovative Company. Innovation is in our DNA and
is one of our main drivers in boosting organic growth and executing our strategies. This
permanently generates differentiating value propositions for clients, with a transversal and
integral vision that means we can respond to business challenges.
We are living through a time of historic change. We are in the Decade of Action, a context of
urgency in which we have the unique opportunity to collaborate in order to tackle social and
environmental challenges. At MAPFRE we know that our response to these global challenges
can only be collective. We believe that small actions add up to create big changes, which is
why we aim to contribute to this process through demanding and unequivocal commitments.
Through this vision, we are working to make quality employment, inclusion, financial
education, accessibility to insurance, and the sustainability of our value chain the drivers of
transformation.
In 2023 we will continue to work on our employer’s brand, to show that we are a different
Company, with a clear purpose, and an excellent place to work, a place “where your time
becomes meaningful”.
MAPFRE’s Strategic Plan 2022-2024 deepens the transformation process that began several
years ago, so we can continue adapting to the complex macroeconomic environment we
operate in, improving our client value proposition and adapting to their new preferences,
being more accessible, different and scalable.
Our change agenda is based on sustainable, balanced and profitable growth; on the
continuous improvement of internal efficiency; and further accelerating the transformation
already underway.
Our values are constant and comprise the hallmarks of our group: Solvency, Innovation,
Service, Integrity, and a Multicultural and diverse team. All of this makes up the new
roadmap that will allow us to achieve our commitments and objectives.
Last year we defined a new strategic plan for MAPFRE Malta 2022-2024, with specific
developments for each company generating important synergies.
We said we had three major areas in our new strategy based on the Group Pillars:
Customer focus. The value proposition must serve this great principle and promote a holistic
view of the customer, differentiating individuals and families from corporate customers.
Distribution and diversification. We remain committed to a multi-channel distribution
model, adapted to the needs of our customers and we must continue to strengthen the direct
relationship with our customers when they require it, either in person or digitally. We shall
continue to offer the widest range of insurance products, diversifying towards those insurance
solutions that best suit our customers and which are also aligned from a technical and capital
management point of view.
Gaining efficiency. Offering the best solutions and services is all well and good, but we also
have to do it at an affordable price, driving towards simplicity and agility. This means
transforming many processes and being more technological, and we are taking on the
challenge determined to achieve this ambitious goal.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xvii
President & Chief Executive Officer’s Statement - continued
Looking forward - continued
One year later, we keep all our commitments and we confirm we are working intensively in
all areas, client focus, distribution and diversification, technical performance and efficiency
to achieve our goal: developing a balanced, profitable and sustainable growth.
We cannot and must not forget that the regulatory environment will continue to be very
intense in the coming years and as MAPFRE Malta we welcome all these changes. We will
maintain the same fluid, transparent and cooperative relationship with the different bodies
that regulate our activity, mainly the Malta Financial Services Authority. We always aim to
strike the balance between proper control and business development on behalf of our
intermediaries, providers and other stakeholders. We must all cooperate to achieve full
regulatory compliance without affecting commercial and competitive activity.
A special mention to IFRS17, the new accounting standard we will be adopting in 2023 that
will change the way we account for the insurance business, with significant modifications in
comparison with IFRS 4, mainly for the long term business. We will not modify the
performance of the companies but we will report in a different manner.
Any business strategy requires a favorable and predictable environment to be successful and
we must defend Malta's excellent prospects. Together, we must continue to work towards
making our country increasingly transparent in financial practices and this year we are glad to
see Malta being removed from the grey listing. We must also find solutions to the growing
shortage of qualified professionals in a market of full employment.
As an insurance Group, we reiterate our total commitment to collaborating with other
institutions in the promotion of road safety. We do it with Fundación MAPFRE. As a society,
we cannot accept that serious avoidable accidents continue to occur. Last year was a terrible
one in terms of severe accidents and it seems that 2023 started in a similar condition. We
must raise awareness of the risks of alcohol and drug consumption, the use of mobile phones
and inappropriate speed. We must act holistically in all relevant areas as education,
legislation, scoring of irresponsible drivers, ensuring compliance with the law, improving
infrastructures and black points and vehicle fleets to rise to the challenge of Zero Fatalities on
the roads. All the stakeholders need to act in a coordinated manner to change this situation
and MAPFRE will be there.
As we said last year, we are an insurance Group committed to our shareholders, customers,
distributors, employees and Maltese society and we will continue to work hard every day to
be Your Trustworthy Company.
Signed by Javier Moreno Gonzalez (President & CEO) on 22 March 2023
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
xviii
Directors’ report
The Directors present their annual report for the year ended 31 December 2022.
Principal activities
The principal activities of the Group consist of the business of insurance. The Group is
licensed to carry on general and long-term business. The Group is also authorised to provide
insurance management services.
Review of business
The Company
MAPFRE Middlesea p.l.c. (the ‘Company’) registered a profit before tax of €6.0 million
during the financial year ended 31 December 2022 (“FY 2022”) compared to €4.1 million
registered in the previous financial year (“FY 2021”) with post-tax profits of €3.8 million,
compared to €2.6 million in FY 2021. Technical performance in the non-life business
remained level with previous year although claim levels returned to pre-pandemic level
particularly in Motor. On the other hand group life business returned an even stronger result
than the comparative year. Negative fair value movements, particularly in investment
property, continued on previous year trends particularly resulting from the general increase in
interest rates. During the year a net €1.0 million dividend was received from the subsidiary
MAPFRE MSV Life p.l.c., which improved the financial contribution from investments to
the profits of the Company. Company results also include a €0.5 million recovery from the
liquidation of Progress Assicurazioni S.p.A. equivalent to 6.35% of a subordinated loan that
the Group had given to the then Italian group undertaking.
Premiums written by the Company reached €87.1 million (2021: €80.1 million), an 8.7%
increase with growth in all main classes of business, including Group Life. MAPFRE
Middlesea p.l.c. remained the leader of the non-life market although the Company’s market
share reduced marginally from the previous year following the receipt of provisional market
data as the market registered a growth above that of the Company's.
Technical results for general business dropped to €4.8 million from the €5.3 million of FY
2021, a 9.4% reduction. Premium growth was encouraging particularly in Health and Travel
business, that picked up as outbound tourism outperformed sector estimates. Claims
frequency, which was in part of 2021 still impacted by restrictive measures, increased over
2021 almost reaching pre-pandemic levels. An increase in average claim cost in Motor was
again experienced due to inflation and rising motor parts shipping costs. The impact of large
losses was lower in Motor compared to 2021 which together with favourable run-offs
mitigated most of the higher frequency and higher cost impact. The net combined ratio in
Motor improved marginally to 99.8% from the 100.3% registered in FY 2021, however it still
closed above set targets. The whole non-life portfolio closed with a net combined ratio of
92.6% up from the 91.8% registered the previous year as a number of large losses in the
Liability class of business edged up the total large loss impact for the year. Group Life
produced another strong result contributing €1.3 million, above the €0.9 million in FY 2021
mainly due to a reduction in claims incurred.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
1
Directors’ report - continued
Review of business - continued
The Company - continued
As the economy continued to recover from the effects of the pandemic, the impacts of the
Ukrainian war on the world economy, spiralling inflation worldwide, and increased interest
rates, all had an impact on asset values and Company expenses. Margins continue to be
squeezed and in particular in non-life business the rising claim costs has required close
monitoring of each line of business, ensuring pricing adequacy whilst introducing changes in
the products offered, taking on risk that is within the Company’s risk appetite to maximise
profit.
Business and client retention remains a major challenge as clients seek insurance cover that
suits their needs at the right price. The Company remains focused on offering its clients a
better service directly or through its numerous intermediaries, even if remotely. The
Company continues to roll-out its implementation of its new insurance IT system, both in
terms of products, with the first Motor products launched, and also in term of distribution,
with the system rolled out to all Tied Insurance Intermediaries and Brokers. This together
with upgrading its technological platforms will bring the Company closer to its clients. As
progress is made in rolling further products onto the new system, the Company is aware of
the inherent risks that an overhaul of the core IT system brings about both to resources and
operations and Management plans to ensure transition is done in a way to mitigate such risks.
The Company’s net investment return amounted to €1.1 million compared to the €0.4 million
in FY 2021. During 2022 MAPFRE MSV Life p.l.c. paid a contained dividend to its
shareholders after an absence of two years of which the Company received a net €1.0 million.
Due consideration is taken of the Solvency position of MAPFRE MSV Life p.l.c. in
determining the level of dividend to be paid. The current economic environment and the
significant fair value losses put a strain on the Solvency of the life company and management
continues to take all necessary actions to maintain the Solvency position in an adequate level
in line with its risk appetite. Revaluation of investment property held by the Company
rendered a loss of €0.6 million for 2022 compared to a loss of €0.5 million the previous year.
The Shareholder’s Funds of the Company at €77.1 million saw an increase of 0.9% during
FY 2022 resulting from the profit for the year exceeding the payment of dividend for FY2021
and negative investment value movements in equity. Net Asset Value per share as at 31
December 2022 amounted to €0.84.
MAPFRE Middlesea p.l.c.’s solvency position remained strong with net assets remaining
adequately above the capital requirements under Solvency II with the cover being reported in
the Solvency and Financial Condition Report (SFCR) to be published by the Company later
in the year.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
2
Directors’ report - continued
Review of business - continued
MAPFRE MSV Life p.l.c.
MAPFRE MSV Life p.l.c. (“MAPFRE MSV Life” and “MAPFRE MSV Group”) registered a
profit before tax of €17.2 million for FY 2022, up 3.0% on the previous year when a €16.7
million profit before tax was generated. Profit after tax is recorded at €11.7 million, up 10.4%
on the €10.6 million in the previous year.
Operating results benefited from a better than expected performance from the Life protection
book of business. Apart from the positive underwriting result, this line of business benefited
significantly from the increase in interest rates experienced during 2022. However, the
difficult and complex economic and financial market environment has weighed heavily and
negatively, in terms of With-Profits gross written premium, with a marked reduction over the
previous year.
During the year, Central Banks shifted from an accommodative to a restrictive monetary
policy to stem the surge in inflation, which was initially fuelled by supply chain challenges,
economies opening up following improvement in COVID-19 situation and then further
compounded with the war in Ukraine. The global economic outlook deteriorated with
consensus forecasts pointing towards a recession with estimates ranging from a mild to a
more severe recession. This backdrop was conducive to a risk off sentiment for the most part
of the year resulting in a selloff in the equity markets while negative yields turned positive,
effectively ending a decade long of low and negative yields environment. The unusual
simultaneous losses in equities and bonds were even more extraordinary given that both asset
classes' losses were significant, in double-digit figures.
Gross premiums written for FY 2022 totalled €248.8 million, a decrease of 23.5% over the
prior year €325.1 million, driven mainly by a lower demand from single premium With-
Profits business. The uncertain economic environment, increased market volatility and
increased debt issuance at higher coupon rates were the main factors behind the decrease in
demand for MAPFRE MSV Life’s flagship product, the With Profits Single Premium Plan.
Regular premium business was more resilient with premiums growing at a satisfactory rate
over previous year. In terms of regular business, it is noteworthy to mention that personal
pension plans continued to experience sustained demand while interest in Voluntary
Occupational Pension Schemes (VOPS) improved and encouraging results registered in this
segment. In line with our strategy of risk, product and income diversification, increasing
focus on unit-linked single and regular-premium business together with personal and
corporate pensions business will drive new business to support our flagship with-profits
products.
Net claims incurred decreased to €295.0 million through the year compared to a prior year
€305.0 million largely as a result of a decline in maturing medium-term single premium
contracts. A large proportion of maturing contracts were subsequently re-invested in new
medium to long-term contracts.
In aggregate, the balance on the long term business technical account decreased to €17.2
million from a prior year €18.1 million as a result of the lower demand for single premium
With Profit product.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
3
Directors’ report - continued
Review of business - continued
MAPFRE MSV Life p.l.c. - continued
The MAPFRE MSV Group’s total assets decreased by 13.4% from €2,721.4 million at the
end of 2021 to €2,357.0 million at the end of 2022, whilst net technical provisions (including
investment contracts without DPF) decreased by 15.3% from €2,437.6 million in 2021 to
€2,063.8 million in 2022.
The value of in-force business, which projects future transfers to shareholders arising from
policies in force at the end of the year, decreased by 8.4%, from an €87.1 million value in
2021 to €79.8 million in 2022. This is attributable to the impact of increased interest rates and
lower asset market values.
Total shareholders’ funds at the close of 2022 amounted to €224.3 million (2021: €221.9
million), an increase of 1.1% over the previous year and well ahead of minimum solvency
guidelines. The end of year Solvency Capital Requirement ratio is expected to be lower than
the corresponding 2021 figure. The Company will continue to monitor the business and
financial markets developments and consider measures in line with its risk management
framework to maintain the solvency ratio within its articulated risk appetite.
The shareholders of MAPFRE MSV Life are wholly committed in ensuring that the company
remains adequately capitalised at all times to sustain business growth and to meet Solvency
Capital Requirements in line with the Solvency II framework.
The MAPFRE MSV Life With Profits Fund stood at €1.89 billion at 31 December 2022
(2021: €2.25 billion). The fall in the fund value was driven by the lower re-pricing of assets
following the financial markets downturn and the negative operational cashflows arising from
maturity outflows and decrease in gross written premiums.
As mentioned above, the breadth and depth of the financial markets turmoil was such that
even well diversified investment portfolios closed the year with a negative performance,
notwithstanding the market recovery from the year's low, during the last quarter. Historically,
whenever equities experienced increased volatility, bonds provided the main diversification
benefits within investment portfolios. However, in 2022, this was not the case given that even
investment grade credit and government bonds registered double-digit losses. Locally, the 10-
year Malta Government Stock saw a price reduction of over 20%. In 2022, bond markets
suffered the worse loss in more than a century.
The investment strategy of the MAPFRE MSV Life's With Profits Fund is to hold a
diversified range of quality assets, spread across different geographies and currencies to
mitigate market and concentration risk. This asset diversification together with the robust
investment management process, the expertise of the asset managers engaged, and the
company’s strong track record of investment management continue to be fundamental in
managing policyholders' assets in a challenging and even more volatile investments market
environment.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
4
Directors’ report - continued
Review of business - continued
MAPFRE MSV Life p.l.c. - continued
Notwithstanding the active management of the Fund, which resulted in a number of tactical
positions being taken during the year, the total investment losses of the With Profits Fund
amounted to €270.4 million generating a negative return of 13.1%. This performance was
comparable to what are generally referred to as “balanced” investment funds. The With
Profits Fund’s investment strategy, which is subject to regular review, remains well
positioned to benefit from the eventual economic and capital markets recovery and the
medium to long-term opportunities that this new environment presents.
In March 2023, the Board of Directors of MAPFRE MSV Group approved a resolution
whereby differential rates of Regular Bonuses were declared in respect of With Profits plans
held with MAPFRE MSV Life for the year ended 31 December 2022. These amounted to
0.90% for the Comprehensive Life Plan (regular and single premium policies), 1.00% in
respect of the Comprehensive Flexi Plan (regular and single premium policies), 1.00% under
the Single Premium Plan and 1.00% under the With-Profits options of the Investment Bond,
Retirement Plan and of the Personal Pension Plan. On the ‘Old Series’ Endowment and
Whole Life policies, a Regular Bonus of 1.00% of the basic sum assured plus bonuses was
declared.
In addition, the Board also announced the declaration of a Final Bonus in respect of
Comprehensive Life Plans (single and regular premium), Comprehensive Flexi Plans (single
and regular premium) and Single Premium Plans that have been in force for more than 10
years. For Regular Premium policies, the Final Bonus is expressed as a flat percentage plus a
percentage for every year in force after the 25th year of the policy whilst, for the Final Bonus
on Single Premium policies is being expressed as a combination of a flat percentage plus an
additional percentage for every year in force after the 10th year of the policy. Final Bonuses
will be paid on the value of the Policy Account as at the date of death or maturity between 1
May 2023 and the next bonus declaration in accordance with the following table:

Product | Final Bonus Flat Rate % | Rate per Year in Force | After Years in Force
Comprehensive Life Plan ( Regular Premium) | 5.00% | 1.50% | 25
Comprehensive Flexi Plan (Regular Premium) | Nil | Nil | N/A
Single Premium Plan | 5.00% | 0.75% | 10
Comprehensive Life Plan (Single Premium) | Nil | 3.00% | 10
Comprehensive Flexi Plan (Single Premium) | 7.50% | Nil | N/A

The Board of MAPFRE MSV Life also approved a Regular Bonus of 0.90% on those Secure
Growth policies which formed part of the portfolio of business transferred to MAPFRE MSV
Life from Assicurazioni Generali S.p.A. during 2000. Finally the Board also approved a
Regular Bonus of 1.00% on the ALICO 78 policies and a Regular Bonus of 1.00% on the
ALICO 66 polices which formed part of the portfolio of business transferred to MAPFRE
MSV Life in 2011 from American Life Insurance Company (“ALICO”).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
5
Directors’ report - continued
Review of business - continued
MAPFRE MSV Life p.l.c. - continued
Notwithstanding the prudent investment policy adopted by MAPFRE MSV Life, past
performance is no guarantee for the future. Although MAPFRE MSV Life’s With Profits
investments have generally provided policyholders with stable and satisfactory returns when
compared with other similar investment products, in the light of the current uncertainty in the
capital markets, investment returns could fluctuate further. Fair value movements and
investment returns impinge directly on the rates of bonuses declared by the company. Regular
Bonuses are therefore expected to vary over the lifetime of the policy whilst Final Bonuses
are likely to be highly volatile and very dependent on the investment performance of the
company.
In 2022, the life insurance market in Malta saw a contraction as inflation surged and the
economic and financial markets outlook deteriorated. The 2022 regular bonus rates represent
a maximum reduction of 1.00% from the 2021 declaration. The policy holders are benefiting
from the application of the smoothing with the With Profits fund, in light of the negative
investment performance experienced in 2022.
Following MAPFRE MSV Life’s Board of Directors’ approval of the 2022-2024 Strategic
Plan, the unfolding economic and capital market developments during 2022 were
significantly and unfavourably different to the assumption made at plan definition stage.
Notwithstanding, the company remains resolute in the 2022-2024 Strategic Plan execution.
Good progress along the three main strategic pillars of; revenue streams diversification; data
and digital transformation and excellence in customer service has been made.
Revenue streams diversification is one of the main pillars over this strategic period. Product
innovation and distribution channel enhancement initiatives are the main drivers
underpinning this strategic objective. The company remains focused on growing the regular
savings business and in further developing the Unit Linked business segment. The company
remains committed in contributing towards a solution to the country’s challenge of pension
system sustainability. The company continues to invest in products and systems to enable it to
offer financial solutions to better support policyholders’ financial goals and aspirations during
their retirement years.
In the second half of the year, we saw a more subdued demand for single premium contracts.
In the last quarter of the year, with investor sentiment and consumer confidence at low levels,
the drop in demand was more accentuated. The shift away from low and negative interest
rates is expected to continue to affect negatively on short-term demand as economies
transition to a higher interest environment.
The demand for new retirement savings products continues to be encouraging and the
company saw improved turnover in regular savings contracts. The company continued to be
very active in the Personal Pension segment and the Voluntary Occupational Pension Scheme
product, WorkSave, saw increased demand with the on boarding of a number of companies.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
6
Directors’ report - continued
Review of business - continued
MAPFRE MSV Life p.l.c. - continued
The life protection line of business demand was in line with expectations. Locally, demand
for life protection continues to be strongly correlated with the demand for home loans. The
need to have life protection as a basic element of financial planning remains
underappreciated. The company feels that promoting the importance of having adequate
levels of insurance is also part of its responsibilities to build more financially secure and
resilient communities.
There were no significant insurance or financial risks impacting the portfolios of business,
during the year, and mortality assumptions used in the valuation of policyholder obligations
remained appropriate.
Other subsidiaries
The other subsidiaries within the Group, though not significant to the size of the Group, had a
mixed contribution to the results of the year.
BEE Insurance Management Limited (‘BEE’) and its subsidiary Euro Med Risk Solutions
Limited which offer Insurance and Non-Insurance management services saw a drop in third-
party revenue due to fee adjustments. During FY2022 BEE commenced servicing the
Group’s insurance entitities in the Information Technology sphere. A combined profit of €0.2
million was registered compared to a loss of €0.1 million in the comparative period.
Church Wharf Properties Limited holds a property within the Regeneration of the Grand
Harbour Area. A negligible gain was recorded in the year compared to loss of €0.4 million
was registered at the end of 2021 which had resulted from a change in methodology applied
for the valuation of property. The directors continue to monitor the evolution of this project
which gives a potential future increase in value of this investment.
The Group
The Group registered a profit before tax of €22.2 million in FY 2022 compared to €20.4
million achieved in FY 2021. Profit after tax for FY 2022 closed at €14.6 million a 13.3%
increase from the €12.9 million achieved in FY 2021. Group premiums written reaching
€335.9 million saw a drop of 17.1% against that registered in FY 2021, with both insurance
companies remaining leaders in their respective markets.
MAPFRE Middlesea’s Group capital and reserves attributable to shareholders at 31
December 2022 amounted to €113.1 million (2021: €111.0 million) on a consolidated basis
with a net asset value per share of €1.23 as at 31 December 2022 mainly as the result for the
year outweighed the decrease in the value of in-force business and the payment of dividend
by both MAPFRE Middlesea and MAPFRE MSV Life.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
7
Directors’ report - continued
Review of business - continued
The Group - continued
Whilst as a Group we have an important role to provide our customers with prosperity and
peace of mind, we acknowledge that we have a wider commitment to society by also
supporting those who are not our customers. Over the years we have developed a Corporate
Social Responsibility (CSR) policy framework which encompasses shareholders, the
environment, people, communities and customers. Through our CSR programme we
cooperate with and assist a number of public and private institutions, NGOs, museums,
foundations and associations who share similar goals and values as us.
Sustainability is also very high in our agenda. In line with the MAPFRE Group's
Sustainability Plan, the Group is committed to be carbon neutral by end 2030. To this effect a
number of initiatives are being implemented and more will be formulated as we move
towards this important goal. Good progress is also being registered in terms of the
environment, social and governance (ESG) dimensions.
As a financial institution, we are aware of our responsibility and contribution towards
sustainability and that this will primarily depend on how the Group allocates capital through
its investing decisions. To this effect, our initial focus revolved on updating the Investment
Policy and processes at MAPFRE MSV Life p.lc. through the endorsement of the Principles
for Responsible Investing. In terms of the Sustainable Financial Disclosure Requirements
(SFDR), our With-Profits Fund, is currently classified as Article 6. The intention is to
transition this Fund to an Article 8 classification. An article 8 Fund has greater disclosure
requirements and must also promote environmental or social characteristics. Segregated
Investment management’s mandates have been updated to include sustainability factors and
financial exposures via pooled funds are being monitored and assessed depending on in their
sustainability objectives. In 2022, our Product Oversight Governance (POG) policy at both
MAPFRE Middlesea and MAPFRE MSV Life were updated to include sustainability factors
considerations. We believe that by promoting and providing pension products we are also
contributing to the social dimension.
Other initiatives like remote working, files digitilisation, electronic communication and
promotion of hybrid and electric vehicles, and the upcoming installation of photovoltaic
panels on the roofs of both Head Offices, lower our carbon footprint and move us closer to
our goal of becoming carbon neutral. The Group can also boast to have a diverse
multinational workforce with high levels of female participation in senior management
positions. We are also proud to have achieved the target set in terms of the gender pay gap
metric. During 2022 the Company has also joined the MESGA, the Malta ESG Alliance that
brings together the main private companies on the island that foster ESG initiative and can
accelerate the sustainability of Malta.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
8
Directors’ report - continued
Review of business - continued
The Group - continued
Training and development of our people continued to feature high on our agenda during
2022. We value our people and seek to help them achieve their full potential by providing
them with internal and external training opportunities in Malta as well as overseas. In order to
ensure the well-being and ongoing development of our people, we are continuously reviewing
and updating our HR policies and implementing new policies and employment practices.
During the year, both MAPFRE Middlesea p.l.c and MAPFRE MSV Life p.l.c. were awarded
the HR Quality Mark by the Foundation for Human Resources Development.
The Board expresses its gratitude and appreciation to the management and staff of all the
Group companies for their commitment and contribution to another satisfactory year, to
intermediaries for their continued support and to the many loyal customers for placing their
trust in MAPFRE Middlesea p.l.c. and MAPFRE MSV Life p.l.c..
Going forward we will maintain strong focus on our customers by continuously assessing our
business processes and operations in order to provide good value and excellent service. To
this end, we will continue to invest and innovate in information technology. During 2022 we
progressed on our major IT programmes in both insurance companies. MAPFRE Middlesea,
whilst still suffering some delays, achieved a number of goals in its plan for the year,
including the launch of Motor product and the roll-out to Tied Insurance Intermediaries and
Brokers, and is heading for critical milestones in its roll-out in the coming months. MAPFRE
MSV Life achieved a number of important milestones with the main highlight being a
successful migration of the savings book of business to the new Policy Administration System.
This was only possible thanks to our employees’ professionalism and commitment together
with our supplier’s expertise. Over the next year, the Group looks forward to consolidate on
these achievements and to further deliver in terms of the customer journey experience and its
digital transformation.
We consider our distribution footprint in Malta to be one of our key strengths. We are going
to persist on the multichannel approach, we want the client to receive the same price from the
Company whatever channel he chooses to approach the Company: Direct, Agents, Tied
Insurance Intermediaries or Brokers. In MAPFRE MSV Life, whilst bancassurance remains
the most important distribution channel, to ensure that we provide our customers with greater
accessibility and a better service, we are continuously seeking to strengthen all other
distribution channels.
The Group continues to seek growth in its core business lines and believes that its increasing
integration with MAPFRE Group strategies will further strengthen and consolidate business
prospects.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
9
Directors’ report - continued
Review of business - continued
Outlook
The outlook of the Board of Directors for 2023 remains one of cautious optimism. The local
economy is expected to remain resilient in the context of a more challenging environment as
inflationary pressures continue to push the cost of living higher. Global capital markets
outlook remains one of volatility, at least, as long as inflation concerns persist and the interest
rate path remains unclear with continued geopolitical risks in the background. With inflation
running at levels not seen in decades, global central banks will continue to play a crucial role
through monetary policy and their actions and forward guidance having a significant bearing
of the investors sentiment and capital markets performance. Taming inflation while avoiding
a hard landing will remain the key tough priority of global central banks. Geopolitical risks
will also continue to bear on the global economic recovery and capital markets volatility. The
war in Ukraine not only continues to exacerbate the supply chain bottlenecks and inflationary
pressures but further potential escalations could serve as a catalyst for markets to sell off.
Within this context, inflation will have an impact on all the services that the Group receives
both in running its operations and also from a claims perspective. Correct pricing will be key
to ensure that the demand for general business products grows sustainably yielding an
adequate return. Demand for the regular protection and savings business are expected to
remain strong but the more challenging conditions present in the last quarter of 2022,
particularly for lump sum single premium business, are expected to persist in 2023. In the
medium to the long term, the structural shift from negative to positive interest rates is
considered favourably for MAPFRE MSV’s business model. However, in the short term, this
acts as a headwind for our traditional lump sum investment and savings products as
competition intensifies.
Changing customer behaviours, dramatic technological developments, product innovation
and the disruption that is taking place in the insurance industry will require insurance
companies to adapt to be in a position to exploit the many opportunities that will certainly
arise.
From a regulatory point of view, in terms of prudential and conduct regulation, we are
looking at developments in a number of important reviews in the context of Packaged Retail
and Insurance - Based Investment Products (PRIIPS), the Insurance Distribution Directive
and Solvency II. Increased regulation in the form of sustainability-related disclosures
emanating from the Sustainable Finance Disclosure Regulation (SFDR) and the new
Corporate Sustainability Reporting Directive (CSRD) is also expected. Of particular
relevance will be the developments in the European Commission’s Retail Investment
Strategy. The prevailing Anti-Money Laundering Directives will also feature prominently in
the evolving regulatory landscape as well as the newly enacted Digital Operational Resilience
Act (DORA), with requirements emanating thereunder seeking to achieve a high common
level of digital operational resilience. Over the past year, we have made significant
investments to strengthen our compliance and risk management framework, particularly in
terms of the Prevention of Money Laundering and Funding of Terrorism (PMLFT).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
10
Directors’ report - continued
Review of business - continued
Outlook - continued
MMS and MMSV will apply IFRS 17 and IFRS 9 for the first time on 1 January 2023. Both
companies have an ongoing implementation programme to implement such standards, which
are responsible for forming accounting policies and developing methodologies, establishing
appropriate processes and controls and implementing actuarial and accounting system
changes. The Board is monitoring the progress of the implementation plan to ensure that the
necessary priority is given to the implementation of IFRS 17.
Principal Risks and Uncertainties
The Group’s principal risks and uncertainties are further disclosed in Note 4 dealing with
management of risk as supplemented by Note 3 relating to the use of accounting estimates
and judgements in applying accounting policies, Note 16 on intangible assets covering details
on the Group’s value of in-force business, Note 19 on investment property discussing
significant unobservable inputs used, and Note 24 discussing the assumptions underlying the
technical provisions.
Growth Investments Limited
During 2022, Growth Investments Limed, the subsidiary of MAPFRE MSV Life p.l.c.,
surrendered its license and resolved to liquidate effective 31 August 2022, as per Note 36 in
the below financial statements. The appointed external auditor is currently auditing the
subsidiary’s winding up accounts and scheme of distribution.
Results and dividends
The consolidated profit or loss account is set out on page 48. A gross dividend in respect of
year ended 31 December 2022 of €0.054617 per share amounting to a total dividend of
€5,024,817 is to be proposed by the Directors at the forthcoming annual general meeting.
This is equivalent to a net dividend of €0.038043 per share amounting to a total net dividend
of €3,500,000 (2021: €2,400,000).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
11
Directors’ report - continued
Directors
The Directors of the Company who held office during the period under review were:
Martin Galea
Jose Ramon Alegre
Antoinette Caruana
John Cassar White (appointed until 29 April 2022)
Gordon Cordina (appointed as from 29 April 2022)
Jose Maria del Pozo
Jose-Luis Jimenez
Taddeo Scerri (appointed until 29 April 2022)
Etienne Sciberras (appointed as from 29 April 2022)
Robert Suban (appointed as from 29 April 2022)
Paul Testaferrata Moroni Viani
Joseph F.X. Zahra (appointed until 29 April 2022)
In accordance with the Articles of Association of the Company, all Directors retire from
office at the Annual General Meeting and are eligible for re-election or re-appointment.
Further information is given in the Statement of Corporate Governance.
Statement of Directors’ responsibilities for the financial statements
The Directors are required by the Insurance Business Act, 1998 and the Companies Act, 1995
to prepare financial statements which give a true and fair view of the state of affairs of the
Group and the Company as at the end of each reporting period and of the profit or loss for
that period.
In preparing the financial statements, the Directors are responsible for:
•ensuring that the financial statements have been drawn up in accordance with
International Financial Reporting Standards as adopted by the EU;
•selecting and applying appropriate accounting policies;
•making accounting estimates that are reasonable in the circumstances;
•ensuring that the financial statements are prepared on the going concern basis unless it
is inappropriate to presume that the Group and the Company will continue in business
as a going concern
The Directors are also responsible for designing, implementing and maintaining internal
control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error, and that
comply with the Insurance Business Act, 1998 and the Companies Act, 1995. They are also
responsible for safeguarding the assets of the Group and the parent Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
12
Directors’ report - continued
Statement of Directors’ responsibilities for the financial statements - continued
The financial statements of MAPFRE Middlesea p.l.c. for the year ended 31 December 2022
are included in the Annual Report 2022, which is published in hard-copy printed form and
also made available on the Company’s website. The Directors are responsible for the
maintenance and integrity of the Annual Report on the website in view of their responsibility
for the controls over, and the security of, the website. Access to information published on the
Company’s website is available in other countries and jurisdictions, where legislation
governing the preparation and dissemination of financial statements may differ from
requirements or practice in Malta.
The directors confirm that, to the best of their knowledge:
•the financial statements give a true and fair view of the financial position of the Group
and Company as at 31 December 2022, and of its financial performance and its cash
flows for the year then ended in accordance with International Financial Reporting
Standards as adopted by the European Union on the basis explained in Note 1 to the
financial statements; and
•the Annual Report includes a fair review of the development and performance of the
business and the position of the Group and Company, together with additional
information of the principal risks and uncertainties that the Group and Company face.
Information pursuant to Capital Markets Rule 5.64
The Company has an authorised share capital of €31,500,000 divided into 150,000,000
ordinary shares with a nominal value of €0.21 each.
The issued share capital of the Company is €19,320,000 divided into 92,000,000 ordinary
shares of €0.21 each. The issued shares of the Company consist of one class of ordinary
shares with equal voting rights attached.
The directors confirm that as at 31 December 2022, only MAPFRE Internacional (55.83%)
and Bank of Valletta p.l.c. (31.08%) held a shareholding in excess of 5% of the total issued
share capital.
Pursuant to the Company’s Articles of Association, the appointment of Directors to the Board
is reserved exclusively to the Company’s shareholders (in line also with general and
commonly accepted practice in Malta). Shareholders with 11% or more of the shares in issue
are entitled to appoint one director for every 11% holding, whilst the other shareholders are
entitled to appoint the remaining Board members at the Annual General Meeting in
accordance with the provisions of the Articles of Association. The Chairman shall be
appointed by the Board of Directors.
The rules governing the appointment and replacement of the Company’s directors are
contained in Articles 93 to 102 of the Company’s Articles of Association.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
13
Directors’ report - continued
Information pursuant to Capital Markets Rule 5.64 - continued
The Directors can only issue shares following an extraordinary resolution passed in the
General Meeting. This and other powers vested in the Company’s Directors are contained in
Articles 84 to 90 of the Company’s Articles of Association.
The Memorandum and Articles of the Company may be amended by means of an
extraordinary resolution of the Company during general meetings.
There are no agreements between the Company and the Directors on the Company’s Board or
employees providing for compensation on termination or cessation of their office for any
reason whatsoever.
It is hereby declared that as at 31 December 2022, information required under Capital
Markets Rules 5.64.2, 5.64.4, 5.64.5, 5.64.6, 5.64.7 and 5.64.10 is not applicable to the
Company.
Going concern
The Directors, as required by Capital Markets Rule 5.62 have considered the Group’s and
Company’s operational performance, the statements of financial position as at year end as
well as the business plans for the coming year, and declare that they have a reasonable
expectation that the Group and the Company have adequate resources to continue in
operational existence for the foreseeable future. For this reason, in preparing the financial
statements, the Group and Company are in a position to continue operating as a going
concern for the foreseeable future.
Auditors
The auditors, KPMG, have indicated their willingness to continue in office and a resolution
for their re-appointment will be proposed at the Annual General Meeting.
Information pursuant to Capital Markets Rule 5.70
There were no material contracts in relation to which a Director of the Company was directly
or indirectly interested.
Information pursuant to Capital Markets Rule 5.70.2
The Company Secretary is Dr Daphne Sims Dodebier and the registered office is Middle Sea
House, Floriana, Malta.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
14
Directors’ report - continued
Information pursuant to Capital Markets Rule 5.68
We, the undersigned, declare that to the best of our knowledge, the financial statements
prepared in accordance with the requirements of International Financial Reporting Standards
as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company and its subsidiaries and that this report includes a fair review of
the development and performance of the business and the position of the Company and its
subsidiaries, included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
Signed on behalf of the Company’s Board of Directors on 22 March 2023 by Martin Galea
(Chairman) and Gordon Cordina (Director) as per the Directors Declaration on ESEF
Annual Financial Report submitted in conjunction with the Annual Report and Accounts
2022.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
15
Corporate Governance Statement
1.Introduction
In accordance with Rule 5.94 of the Capital Markets Rules, an issuer whose securities are
admitted to trading on the Malta Stock Exchange should endeavour to adopt the principles as
promulgated within Appendix 5.1 of the Capital Markets Rules entitled The Code of
Principles of Good Corporate Governance (‘the Code’) and is, moreover, obliged to prepare
a report disclosing both compliance and non-compliance with the said principles. In addition,
the Company’s auditors are to include a report on the Corporate Governance Statement in the
Annual Financial Report of the Company.
The Board of Directors (‘the Board’) of MAPFRE Middlesea plc (the ‘Company’ or ‘MMS’)
acknowledges that compliance with the said Code is not mandatory, however notes that the
principles are designed to serve as a guide for the Board and the Company’s Management in
their pursuit of objectives in the interests of both the Company and its shareholders. The
Board, therefore, firmly upholds the principles therein contained as guaranteeing the required
standards of accountability and transparency and strives, to adhere to the Code as well as to
maintain the highest standards of disclosure insofar as both compliance and explaining the
rationale behind the instances of non-compliance.
As evidenced by the information set out in this Statement and that contained in the
Remuneration Statement and Report of the Remuneration Committee to the Shareholders, the
Company believes that it has, save as indicated herein in the section entitled Non-Compliance
with Code, applied the principles and complied with the provisions of the Code throughout
the accounting period under review. In the Non-Compliance Section, the Board outlines and
explains the instances where there has been a departure from, or non-application of, the
principles as contained within the Code, in accordance with the same Code.
2.Compliance with the Code
Principle 1 – The Board
The Board’s role and responsibility is to lead the Company, to discuss and approve strategy
and to exercise good oversight, challenging the Management and Control Functions where
necessary to this end.
As at 31 December 2022 the Board was composed of a non-executive Chairman and eight
non-executive Directors. The Directors, appointed in terms of the Memorandum and Articles
of Association of the Company, are all competent, honest and solvent individuals and thus fit
and proper to direct the business of the Company. The maximum number of Directors
pursuant to the Memorandum and Articles of Association is ten. Martin Galea was re-
appointed as a non-executive Chairman during the Board meeting held on the 29 April 2022,
which followed the Annual General Meeting (AGM) held on the same day.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
16
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 1 – The Board - continued
During the said AGM the two institutional shareholders re-appointed the retiring Directors
Jose Ramon Alegre, Martin Galea, Jose-Luis Jimenez and Jose Maria del Pozo, while the
other shareholders re-appointed the retiring Directors Antoinette Caruana and Paul
Testaferrata Moroni Viani during the election for directors. Gordon Cordina and Robert
Suban were newly appointed by the shareholder Bank of Valletta p.l.c and Etienne Sciberras
was newly appointed by MAPFRE Internacional S.A. in order to bring the total number of
Directors to nine.
All of the Directors of the Company are approved by the Regulator as being fit and proper to
direct the business of the Company and are deemed to conduct themselves with honesty,
competence and integrity. Both on an individual level and collectively, the Members of the
Board are deemed to possess the necessary skills and experience to make effective
contribution to the leadership and decision-making processes of the Company as reflected
within the Company’s strategy and policies. The Board moreover exercises prudent and
effective controls in order to achieve both short and long-term sustainability of the business
and assesses the compatibility of the MAPFRE Group policies with local legal and regulatory
requirements, adapting them where appropriate.
The Board liaises closely with the President & Chief Executive Officer (‘CEO’) of the
Company at all times in order to ensure that the Board receives timely and complete
information in relation to the business of the Company and management performance. This
enables the Board to contribute effectively to the decision-making process and to exercise the
aforementioned controls. Javier Moreno, appointed CEO on the 31 March 2021, continued to
hold the position of CEO throughout 2022.
As is customary, during the year the Board delegated specific responsibilities to a number of
Board Committees, namely the Audit Committee, the Risk and Compliance Committee, the
Investments Committee and the Remuneration Committee, each of which operated under
their respective formal terms of reference approved by the Board.
Further detail in relation to the Committees and the responsibilities of the Board is provided
under Principles 4 and 5 of this Statement.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
17
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 2 – Chairman and CEO
The positions of Chairman and CEO are occupied by different individuals with a clear
demarcation between the leading of the Board and the CEO’s management of the business of
the Company, despite the strong cooperation between the two.
The Chairman is independent and is responsible for leadership of the Board and for the
setting of its agenda. He ensures that the Board’s discussions on any issue put before it are
addressed with adequate depth, that the opinions of all the Directors are taken into account,
and that all the Board’s decisions are supported by comprehensive and timely information.
He encourages active engagement by all the members of the Board with constructive
challenging of the Management where necessary and generally promotes and ensures the
effective functioning of the Board.
The CEO advises and makes recommendations to the Board while leading the Senior
Management team, with the main role and responsibility of managing the Company’s
business in line with its Strategy. Indeed, 2022 was the first year of the new three-year
Strategic Plan as developed by Management in cooperation with the Chairman and approved
by the Board.
The CEO develops and drives performance within the Strategy approved by the Board and
makes decisions on all matters affecting the operations, performance and strategy of the
business save for those matters specifically reserved to the Bo ard or its delegated
Com mittees. The Company also has Technical Committees composed of senior members of
the relative technical areas that hold regular meetings and a Management Committee,
bringing together the Chief Officers within MMS under the Chairmanship of the CEO on a
monthly basis.
The positions of the Chairman of the Board and CEO are distinguished accordingly within
the Terms of Reference of the Board of Directors. In practice, there is a clear division of
responsibility between the overseeing of the Board and the CEO’s responsibility in managing
the business of the Company rendering these positions completely independent from one
another to avoid concentration of authority and power within a single individual and to
differentiate leadership from the running of the business.
Principle 3 – Composition of the Board
The Board considers and experience has shown, that the number of Members as stipulated in
the Memorandum and Articles of the Company are appropriate relative to the size of the
Company and its operations.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
18
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 3 – Composition of the Board - continued
The combined and varied knowledge, experience and skills of the Board members, including
a broad knowledge of the business of the Company and awareness of statutory and regulatory
requirements, provide a balance of competences, as required, and add value both to the
functioning of the Board and to the direction given to the Company. In this regard the
Company remains committed to non-discrimination, not least in its Boardroom, promoting a
diverse and inclusive culture where Directors’ views are heard, concerns are attended to and
the environment does not tolerate bias, discrimination or harassment of any kind.
The Company’s Articles of Association determine the composition of the Board. The
appointment of Directors to the Board is accordingly reserved exclusively to the Company’s
shareholders, except in so far as an appointment may be made to fill a casual vacancy. All
Directors, as well as some key officials, are required to fulfil the fit and proper regime
prescribed by the Malta Financial Services Authority (‘MFSA’) in line with standard
regulatory due diligence procedures. Moreover, all Directors apply the necessary time and
attention to their duties and required to limit the number of directorships held in other
companies thereby also ensuring the proper performance of their functions.
The Board is composed exclusively of non-executive Directors, of which eight are male and
one is female. Although not a Director of MMS, the CEO is invited to attend Board meetings
with a view to ensuring a full understanding and appreciation of the Board’s policies and
strategy and to provide direct input to the Board’s deliberations. In addition, certain members
of Senior Management are invited to report to the Board as and when required thereby
securing effective information flows as well as fostering a culture of continuous dialogue
between the Board and the Company’s Management.
As at the date of this review, the Board consists of six independent Directors (including the
Chairman), and three non-independent Directors (as indicated on page 21 of the Annual
Report) as defined by the Code.
In determining the independence or otherwise of its Directors, the Board considers, amongst
others, the principles relating to independence of directors contained in the Code, the
Company’s own policies as well as general principles of good corporate governance.
In relation to Code Provision 3.2.5 specifically the Code requires that the Board states its
reasons if it determines that a director is independent notwithstanding inter alia if the
director: “has served on the board for more than twelve consecutive years”.
It is noted in this regard that as from April 2022 Paul Testaferrata Moroni Viani has served
on the Board for a period of more than twelve consecutive years, however, the Company was
and remians of the opinion that Paul Testaferrata Moroni Viani has sufficient experience and
maturity to remain independent of character and objective in judgment at all times
notwithstanding the lapse of the recommended twelve years.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
19
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 3 – Composition of the Board - continued
In terms of Code provision 3.4 each non-executive director has moreover submitted his / her
confirmation in writing that he / she undertakes:
i.to maintain in all circumstances his independence of analysis, decision and action;
ii.not to seek or accept any unreasonable advantages that could be considered as
compromising his / her independence; and
iii.to clearly express his / her opposition in the event that he /she finds that a decision of
the Board may harm the Company.
Principle 4 – The Responsibilities of the Board
The Board acknowledges its statutory mandate to set policy and to provide direction as well
as to monitor the implementation thereof. The Board fulfills this mandate and discharges its
responsibilities through the execution of the four basic principles of corporate governance
namely, accountability, monitoring, strategy formulation and policy development.
The Board continually and consistently reviews all the different aspects of the Company
within the parameters of the relevant laws, regulations and codes of best practice, applies
high ethical standards whilst taking into account stakeholders’ interests, maintains an
effective dialogue with all stakeholders, monitors the application of management policies and
motivates Company Management.
Principle 5 – Board Meetings
The Board of Directors sets and supervises the strategy and the policies of the Company, both
of which are discussed on a regular basis, and the business of the Board as well as its agenda
are managed in such a way so as to ensure effective supervision of the Company’s operations
in accordance therewith.
The Board meets as often as required to discharge its duties effectively. Specific members of
the Management team are invited to update and provide the Directors with a direct report at
each Board Meeting depending on the items on the agenda, however, a detailed review of the
Company's Management Accounts and Key Performance Indicators (as promulgated by the
MAPFRE Group in line with industry norms) is carried out at every Board Meeting. The
Board is also updated at every meeting in terms of Management’s comments on the results
and on relevant events and decisions and background information on various subjects
including any matter requiring the approval of the Board.
Apart from setting the strategy and direction of the Company, the Board is actively involved
in monitoring progress against Budget and Strategy and in approving material or significant
transactions.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
20
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 5 – Board Meetings - continued
The Chairman in conjunction with the Company Secretary ensures that all relevant issues are
on the agenda and are supported by all available information. The agenda for each meeting
seeks to strike a balance between long-term strategic objectives and shorter-term performance
matters. Notice of the dates of forthcoming Board meetings together with all relevant
documentation are circulated in advance to all Directors in order to give them opportunity to
consider the information and prepare well in advance of each Board meeting.
During Board meetings members of Management are often invited to present on the subject
matter being discussed while the Chairman facilitates discussion and ensures that all
Directors are given ample opportunity to discuss issues set on the board agenda and convey
their opinions thereon.Minutes are taken of each and every Board meeting faithfully
recording attendance, matters discussed, action points and resolutions. These minutes are
subsequently circulated for review to all Directors prior to sign off by the Chairman.
Decisions of the Board are taken by majority of those present subject to the Chairman’s
casting vote in the case of parity.
During financial year 2022, the Board of Directors of the Company held eight Board
Meetings with attendance as follows:
Martin Galea (Chairman) (NED, I)8
Jose Ramon Alegre (NED)8
Antoinette Caruana (NED, I)8
John Cassar White (NED - appointed until 29 April 2022)2
Godon Cordina (NED -appointed on 29 April 2022)1 5
Jose Maria del Pozo (NED)8
Jose-Luis Jimenez (NED)6
Taddeo Scerri (NED, I - appointed until 29 April 2022)2
Etienne Sciberras (NED - appointed on 29 April 2022)2 5
Robert Suban (NED, I - appointed on 29 April 2022)3 6
Paul Testaferrata Moroni Viani (NED, I)8
Joseph F.X. Zahra (NED, I - appointed until 29 April 2022)2
NED – Non-executive Director
I – Independent
1 With regulatory approval as from 20 September 2022;
2 With regulatory approval as from 12 August 2022;
3 With regulatory approval as from 12 September 2022.
The MMS CEO attended all the Board meetings by invitation.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
21
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 5 – Board Meetings - continued
Moreover, during 2022 two Board Briefings were also held in order to provide the Directors
with more detailed information on the subject matter identified as well as to allow
opportunity for deeper discussions of pertinent issues. The focal point of the Directors’
Briefing in June was to review the draft Own Risk and Solvency Assessment prior to
submission to the Regulator including the appropriateness of the Standard Formula approach,
the extent of the Company's solvency, the Own View solvency calculations and the outcome
of the Stress Tests. The second part of the June Briefing was an Induction Briefing for the
newly appointed Directors, delivered by the Chief Officers of the Company according to their
Area, as will be further detailed below.
During the second Briefing held in December the Board carried out an in-depth review of the
strategic developments during 2022, being the first year of the three-year Strategic Plan
including the proposed amendments as to the way forward in 2023 and 2024. In addition, a
presentation was also delivered by PwC, engaged by the Company to oversee and guide the
implementation of IFRS 17. This detailed presentation included, amongst others, an
introduction to the changes that would be brought about by IFRS 17, reporting timelines and
the technical implications relative to the current IFRS 4 comparative.
Notices of meeting dates were circulated well in advance of the relative meetings and
meeting packs containing all relevant information, including the minutes of the previous
Board Meeting, were circulated to the Directors ahead of each meeting by the Company
Secretary. Each communication allowed ample opportunity for the Directors to review the
information and prepare for the next scheduled Board or Committee meeting.
Principle 6 – Information and Professional Development
A formal and structured induction programme consisting in a series of presentations and
meetings with members of the Management team of the Company is conducted for newly
appointed Directors to enable new incumbents to familiarise themselves with the Company’s
strategy, risk appetite and operations. Directors also receive a MAPFRE Corporate
comprehensive guide which includes, amongst others, Directors’ duties and responsibilities.
This Induction Briefing was delivered in the first week of June as aforementioned further to
the appointment of the new Directors at the AGM held on 29 April 2022. Seven of the
Company's Chief Officers, including the CEO, were present at the Briefing to deliver
presentations on their respective Areas and take questions from the Directors.
The Directors also continued to benefit from the MAPFRE Group structured Board training
and development programme including a full on-line training schedule available for
subscription covering twelve sections with a range of topics including Operational, Technical
and AML matters. The key objective of the programme being to contribute to the continued
professional development of the Directors and the Board’s collective awareness of corporate
governance, solvency, insurance finance, strategy and operations.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
22
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 6 – Information and Professional Development - continued
Moreover, Directors are at liberty to take independent professional advice on any matter at
the Company’s expense where they deem it necessary in order to better discharge their duties
as Directors and they have open access to the advice and services of the Office of the
Company Secretary. The Company Secretary remains mindful at all times of the
responsibility of ensuring adherence to Company policies, Board procedures as well as the
facilitation of continual and consistent information flow within the Board and its Committees.
The CEO is appointed by and enjoys the full confidence of the Board and ensures that
systems are in place to cater for, amongst others, the on-going monitoring of Management,
the development and training of both Senior Management and Directors, as well as
succession planning, as required by the provisions of clause 6.4 of Appendix 5.1 of the
Capital Markets Rules. The CEO, although responsible for the recruitment and selection of
senior management, consults with the Remuneration Committee and with the Board on the
appointment of, and on the succession plan, for Senior Management. Training (both internal
and external) of management and employees is prioritised and is implemented through the
Human Resources Department. Several training sessions, both on-line and live, were also
held on various topics during the course of 2022 including on Leadership, Operational Risk,
Change Management, the Digital Environment and Data and challenges within the Insurance
Market.
Principle 7 – Evaluation of the Board’s Performance
During the year under review, the Board once again undertook an evaluation of its own
performance, the Chairman’s performance and that of its Committees. The evaluation was
not conducted externally, but rather, the evaluation exercise was conducted through a Board
Effectiveness Questionnaire prepared by the Compliance Function in cooperation with the
Company Secretary and the Chairman. The outcome of the exercise was summarised into a
Report based on the replies of each individual Director that was then submitted to the
Chairman before being circulated amongst all Board members. The outcome was discussed
during an informal off-site meeting.
No requirement for material changes in the governance structure or processes resulted from
this evaluation exercise, however, the emerging action points and recommendations were
implemented within 2022 as co-ordinated by the Company Secretary and overseen by the
Chairman.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
23
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 8 – Committees
The activities of the Board and of the Company’s Senior Management team are additionally
supported by the Company’s Board Committees structured in such a way so as to assist in the
guiding and monitoring of particular business processes and specific governance issues. The
said Board Committees are the Audit Committee, the Risk and Compliance Committee, the
Investments Committee and the Remuneration Committee. The Terms of Reference of all the
Board Committees have been approved by the Board of Directors and by the MFSA.
Audit Committee
The Audit Committee’s terms of reference are modelled on the recommendations of statutory
directives, the Capital Markets Rules and the principles of Corporate Governance, whilst also
reflecting the provisions of the relevant MAPFRE Group principles. The responsibilities of
the Audit Committee include the following:
•monitoring of the financial reporting process
•monitoring of the independence and effectiveness of the Company’s internal control,
internal audit and risk management systems
•monitoring of the audit of the annual and consolidated accounts
•maintenance of communication on such matters between the Board, management, the
external Auditors and the internal Auditors
•making of recommendations to the Board in relation to the appointment of the
external Auditor and the approval of the remuneration and terms of engagement of the
external Auditor following appointment by the Shareholders in general meeting
•monitoring and reviewing of the external Auditor’s independence and in particular the
provision of additional services
•development and implementation of a policy on the engagement of the external
Auditor to supply non-audit services
•reviewing of actuarial reports
•management of financial risks
•analysis and endorsement of the Annual Internal Audit Plan
•arm’s length nature of related party transactions and
•the audit process.
The Committee generally protects the interests of the shareholders and assists Directors in
ensuring the accuracy of the Company’s financial results and reporting. It ensures that the
Company’s accounting and finance function are robust, advises the Board on financial
reporting in terms of both the financial statements and announcements relative to
performance and also has oversight of the Internal Audit Function to ensure adequate
resources, independence and follow up on any pertinent audit recommendations.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
24
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 8 – Committees - continued
Audit Committee - continued
In regard to the latter, Internal Audit is an independent appraisal function established to
examine and evaluate the activities of the Company and its subsidiaries. The Internal Auditor
reports to the Audit Committee and attends its meetings. The Internal Auditor is charged by
the Audit Committee with the conducting of business process risk-based audits aimed at
assessing the adequacy of controls and business process efficiency. The Internal Audit Area
also liaises closely with the MAPFRE Group Internal Audit Area to this end.
The Audit Committee moreover ensures co-operation between the internal and external
auditors of the Company.
Furthermore, although no such instances arose within 2022, the Audit Committee also
reviews related party transactions, considering their nature and materiality and approves them
if it deems fit, as well as overseeing the implementation of the Company’s Whistleblower
Policy.
The composition of the Company’s Audit Committee is regulated by the Capital Markets
Rules and the Malta Financial Services Authority is kept informed as to any changes in its
composition. In terms of Capital Markets Rule 5.117.3, Jose Maria del Pozo and Martin
Galea are the members of the Audit Committee with the necessary qualifications, experience
and knowledge to render them competent in accounting and auditing. Jose Maria del Pozo
has held the position of Chief Financial Officer of the Eurasia Region of the MAPFRE Group
since 2018 and is also a consultant professor for accounting and financial analysis, while
Martin Galea is qualified in accounting and auditing with years of experience in company
management.
Gordon Cordina was appointed Chairman of the Audit Committee by the Board of Directors
in accordance with Capital Markets Rule 5.117.4 as of 29 April 2022, taking over from
Martin Galea. Of the four Directors making up the Audit Committee, three are considered
Independent Directors in accordance with the criteria set out in Capital Markets Rule 5.119.
The Audit Committee held seven meetings during 2022. In accordance with Capital Markets
Rule 5.117.2, three out of four members are considered independent in line with the criteria
set out in Capital Markets Rule 5.119. These are Gordon Cordina (replacing Taddeo Scerri as
of 29 April 2022), Antoinette Caruana and Martin Galea. The Audit Committee members and
relative attendance at meetings is listed below.
Martin Galea (Chairman until 29 April 2022)7
Antoinette Caruana 6
Gordon Cordina (Chairman as from 29 April 2022)4
Jose Maria del Pozo 7
Taddeo Scerri (until 29 April 2022)3
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
25
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 8 – Committees - continued
Audit Committee - continued
In accordance with Capital Markets Rule 5.118, the Board considers the four Audit
Committee members as having the required competence individually and jointly as a
Committee, due to their professional background and experience in the financial sector, as
well as in other sectors, including the insurance sector, at both national and international
level.
The CEO, the Chief Financial Officer, and the Internal Auditor, amongst other members of
Management, attend the Audit Committee meetings by invitation. The Whistleblower
Reporting Officer reports to the Audit Committee as and when required. The external
auditors are invited to attend meetings of the Audit Committee and are entitled to convene a
meeting of the Committee if they consider that it is necessary. The Company Secretary also
acts as Secretary to the Audit Committee.
The Chairperson of the Audit Committee reports to the Board at every Board meeting thus
ensuring good communication and continuity between the said Board Committee and the
other members of the Board.
Risk and Compliance Committee
This Committee has a two-fold function: it assists the Board in overseeing the Company’s
compliance with the obligations imposed by legislation, codes, rules and regulations, relevant
to the Company and its business; and it maintains oversight for review and proper
implementation of the Company’s Risk policies and assessing and advising the Board on
high-level risk-related matters, including the different types of Risk which the Company and
its subsidiaries may be exposed to from both a financial and non-financial perspective.
To this end the Committee ensures that the Company’s strategy and risk appetite are aligned
and monitors the stress testing framework, governance and internal control structures.
Furthermore, the Committee approves the annual plan for the Compliance Function and is
updated at every meeting on progress in relation to plan and other matters referring to
regulatory compliance risk and the relationship with the Company’s Regulator.
The Money Laundering Reporting Officer, the Complaints Officer and the Anti-Fraud
Officer report directly to this Committee. The Compliance Officer of the subsidiary
companies Bee Insurance Management Ltd. and EuroMed Risk Solutions Ltd. also report to
this Committee at every meeting.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
26
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 8 – Committees - continued
Risk and Compliance Committee - continued
The Risk and Compliance Committee held five meetings during 2022. The Committee
members and relative attendance to meetings is listed below.
Martin Galea (Chairman)5
Diane Bugeja 2
Jose Maria del Pozo 3
Etienne Sciberras (as from 29 April 2022)3
Joseph F X Zahra (until 29 April 2022)2
The CEO, the Chief Financial Officer, the Chief Compliance Officer and the Chief Risk
Officer, amongst others as may be required, attend the Committee meetings by invitation.
The Company Secretary also acts as Secretary to the Committee.
The Chairperson of the Risk and Compliance Committee reports to the Board at every Board
meeting thus ensuring good communication and continuity between the said Board
Committee and the other members of the Board.
Investment Committee
The Investment Committee is a joint Committee composed of Directors of the Company and
Directors of its subsidiary MAPFRE MSV Life p.l.c.. The Investment Committee oversees
the investment activities of the Company and its subsidiaries, executes its policies and
guidelines, scrutinises and approves material transactions and monitors results.
Although the Investment Committee meets on a monthly basis the business of the Company
was discussed at three meetings during 2022. The Committee members and relative
attendance to meetings is listed below.
Simon Azzopardi 3
Romeo Cutajar (Chairman)3
Jose-Luis Jimenez 3
Jose Maria del Pozo 3
Javier Moreno 3
Patrick Spiteri Swain 3
Paul Testaferrata Moroni Viani 3
The CEO of the subsidiary MAPFRE MSV Life p.l.c., the Chief Financial Officer both of the
Company and of its subsidiary MAPFRE MSV Life p.l.c., the MAPFRE Regional Chief
Financial Officer, amongst others as may be required, attend the Committee meetings by
invitation. The Company Secretary of the subsidiary MAPFRE MSV Life p.l.c. acts as
Secretary to the Committee.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
27
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 8 – Committees - continued
Remuneration Committee
The Board of Directors approves the remuneration of Directors and Chief Officers on the
recommendation of the Remuneration Committee. The maximum aggregate directors’
emoluments are established and approved by the shareholders during General Meetings as
and when required.
Further detail on the various aspects of how the Company remunerates its employees, the
workings of this Committee and information relative to its meetings in 2022 are considered in
the Remuneration Statement and Report to the Shareholders.
The Remuneration Committee held two meetings during the period under review and the
attendance was as follows:
Jose Ramon Alegre (Chairman)2
Antoinette Caruana 2
John Cassar White (until 29 April 2022)1
Robert Suban (as from 29 April 2022)1
The CEO for MAPFRE Middlesea p.l.c., the CEO for MAPFRE MSV Life p.l.c., the Chief
Officer, Human Resources for MAPFRE Middlesea p.l.c., amongst others as may be
required, attend the Remuneration Committee meetings by invitation. The Company
Secretary also acts as Secretary to the Committee.
The 2022 Annual Report includes a separate Remuneration Statement in terms of Code
Provisions 8.A.3 and 8.A.4 and Remuneration Report in terms of Code Provision 12.26K.
Principle 9 – Relations with Shareholders and with the Market
The Company recognises the importance of maintaining a dialogue with its shareholders and
of keeping the market informed to ensure that its strategies, as well as performance, are well
understood. The Board is of the view that during the period under review the Company has
communicated effectively with the market through a number of company announcements and
press releases.
The Company also communicates with its shareholders through the Company’s Annual
General Meeting (‘AGM’) concerning which further detail is provided under the section
entitled General Meetings. The Chairman ensures that all relevant individuals including the
Chairpersons of the Board Committees are present at the AGM to answer any questions as
may arise.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
28
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 9 – Relations with Shareholders and with the Market - continued
Apart from the AGM, the Company communicates with its shareholders through the
Company’s Annual Report, as available for review and downloading from the Company’s
website. The Company’s website (www.mapfre.com.mt) also contains information about the
Company and its business, including the six-monthly financial statements and all issued
company announcements together with a section entirely dedicated to investor relations for
the benefit of all Shareholders and the general public.
Furthermore, the Chairman ensures that constant and consistent communication is maintained
with the major shareholders particularly to discuss matters of significant importance or to
address particular issues or concerns. In addition, the Chairman, CEO and Company
Secretary hold an annual meeting with representatives of the Malta Association of Small
Shareholders to discuss various matters in the interests of the minority shareholders.
Individual shareholders can raise matters relating to their shareholding and the business of the
Company at any time throughout the year via the Office of the Company Secretary.
Shareholders are also given the opportunity to ask questions at the AGM or submit written
questions in advance and the Company recognises their statutory right to request the
convening of an extraordinary general meeting in accordance with Article 52 of the Articles
of Association of the Company and Article 129 of the Companies Act (Cap. 386 of the Laws
of Malta).
Principle 10 – Institutional Shareholders
The Company’s institutional shareholders keep the market updated on issues related to their
respective companies through company announcements and press releases. During the year
under review, the Company issued various press releases related to the controlling
shareholder, namely MAPFRE Internacional S.A. in connection with the latter’s operations
abroad. The other institutional shareholder, namely Bank of Valletta p.l.c., is a listed
company on the Malta Stock Exchange and consequently a steady flow of information is
maintained through company announcements and press releases. In addition, the six monthly
and annual results include a section on the insurance interests of institutional shareholders.
Principle 11 – Conflicts of Interest
The Directors are strongly aware of their responsibility to act in the interest of the Company
and its shareholders as a whole at all times, irrespective of whom appointed them to the
Board, and of their obligation to avoid conflicts of interest. During the period under review,
the Board maintained its practice that in the event of a real or potential conflict of interest
arising in respect of a Director in connection with any transaction or other matter, the interest
is to be declared and the individual concerned shall refrain from taking part in proceedings or
decisions relating to the matter. The Board minutes would include a record of such
declarations and of the action taken by the individual director concerned as and when
required.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
29
Corporate Governance Statement - continued
2.Compliance with the Code - continued
Principle 11 – Conflicts of Interest - continued
In accordance with the MAPFRE Corporate Governance Policy and the Policy for Managing
Conflicts of Interest, a Director is to avoid situations in which he could have a conflict of
interest, whether direct or indirect, actual or potential, with the interest of the Company and
shall ensure that personal interests of any nature do not take precedence over the interests of
the Company and its shareholders.
The Company also has an Internal Code of Conduct Relating to Listed Securities addressed
to all directors and selected officers of the Company and its Subsidiary undertakings. The
aim behind this Code is to ensure compliance with the Prevention of Market Abuse
Regulatory Framework as well as the recommendations and principles contained in the
Capital Markets Rules. The Company keeps a record of all advance notices received in
connection with permitted dealings by directors and selected officers and acknowledgements
of such advance notices. The Company reminds all Directors and senior officers of their
obligation to conform to the Code on an annual basis.
As required by clause 11.3 of Appendix 5.1 of the Capital Markets Rules a Directors’
beneficial interest in the share capital of the Company as at 31 December 2022 has been
declared by Paul Testaferrata Moroni Viani stemming from his indirect shareholding in the
Company’s shares through his shareholding in family businesses.
Principle 12 – Corporate Social Responsibility
During 2022, MAPFRE Malta once again met its CSR objectives collaborating with a
number of different entities to organize various activities ranging from food and blood
donations, environmental activities and various donations to various charitable organisations
and NGOs such as Malta Community Chest Fund, Malta Trust Foundation, Majistral Park,
Malta Red Cross Foundation, John’s Rescue Corp, Fondazzjoni Patrimonju Malti and Down
Syndrome Association to mention a few.
Fundación MAPFRE allocated over €160,000 for projects in Malta across different areas
including road safety awareness, health campaigns and social actions. Moreover, the
Foundation has once again collaborated with Inspire and Equal Partners Foundation, funding
the provision of specialized services to children and adults with disabilities (€53,000 to cover
the running costs of Inspire’s therapeutic facilities Multi-Sensory Rooms and over €30,000 to
Equal Partners Foundation to support their efforts to enable children who suffer from a
disability to lead a more independent life).
MAPFRE Malta also joined the fight against breast cancer with a variety of awareness-
raising activities through their #ThinkPink campaign, as well as by collaborating with the
Action for Breast Cancer Foundation as per previous years.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
30
Corporate Governance Statement - continued
3.Non-compliance with the code
Principle 3 – Composition of the Board
The Code recommends that the Board of Directors be composed of executive and non-
executive Directors, including independent non-executives. The Company’s Board, as
explained in Section 2 – Principle 3 of this Statement, is composed exclusively of non-
executive Directors. The appointment of Directors to the Board is a matter reserved
exclusively to the Company shareholders (except in the case of the filling of a casual
vacancy) and each Director retires from office at the AGM. Therefore, the composition of the
Board of Directors is determined by the shareholders during the AGM. Moreover the CEO of
the Company attends and reports during all meetings of the Board and various Senior
Managers attend by invitation to report on salient matters thereby ensuring a constant and
effective flow of information between the Company’s Management and Board of Directors.
Principle 4 – The Responsibilities of the Board
Code Provision 4.2.7 recommends: “the development of a succession policy for the future
composition of the Board of Directors and particularly the executive component thereof, for
which the Chairman should hold key responsibility”.
Regard being had to the non-executive role of the Company’s Directors and in view of the
facts explained above, particularly that the appointment of Directors is a matter reserved
exclusively to the Company’s shareholders and that every director retires from office at the
Annual General Meeting, the Company has opted not to formalise a succession policy for the
Board of Directors. That said, the Company and its Board remain mindful of the
recommendation as contained within the Capital Markets Rules and frequently reviews the
current position.
Principle 7 – Evaluation of the Board’s Performance
Code Provision 7.1 recommends: “the Board should appoint a committee chaired by a non-
executive Director in order to carry out a performance evaluation of its role”.
As explained above the Board has not appointed a specific committee to carry out a
performance evaluation but has rather opted to have an annual performance evaluation
exercise carried out under the auspices of the internal Compliance Area through the
compilation of a Board Effectiveness Questionnaire by each individual Director.
The questionnaire is particularly robust and is structured into eight sections with a total of 63
statements covering several aspects of Board membership including the understanding of the
workings of the Board and its Committees, the Company’s products and services, distribution
channels, strategy and risk, as well as governance, training requirements, subsidiaries and
contingent liabilities. Directors are also invited to elaborate further on any of the statements
at the end of the questionnaire.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
31
Corporate Governance Statement - continued
3.Non-compliance with the code - continued
Principle 7 – Evaluation of the Board’s Performance - continued
An objective and independent report as to the overall outcome of the findings is then drawn
up by the Compliance Area and shared with the Chairman to co-ordinate further individual or
group discussion with the Directors based on the replies. In 2022 a group discussion was
facilitated by a specific off-site meeting presided over by the Chairman.
For these reasons the process is deemed to be comprehensive and sufficient to meet the
intended aims.
Principle 8A – Remuneration Committee: Code Provision 8.A.1
Code Provision 8.A.1 recommends that the Board of Directors “should establish a
Remuneration Committee composed of non-executive Directors with no personal financial
interest other than as shareholders in the Company, one of whom shall be independent and
shall chair the Committee”.
The Remuneration Committee is made up of Jose Ramon Alegre (Chairman), Antoinette
Caruana and Robert Suban. The composition has seen a reshuffle relative to the previous year
to continue to foster open dialogue and to ensure that all shareholders are represented
contributing to independence and objectivity in the functioning of the Committee. Decisions
are reached on the basis of the consensus of all members present.
The fact that decisions are taken by the unanimous agreement of all members present also
implies that the final outcome of discussions and decisions taken by the Remuneration
Committee are not affected by the director holding the Chair even though the Committee is
not chaired by an independent non-executive Director. Committee document packs are also
circulated to all Members well in advance of the meeting allowing all Members ample
opportunity to informally discuss any matters in anticipation of the Meeting and / or to
represent their views.
Principle 8B – Nomination Committee
Pursuant to the Company’s Articles of Association and as aforementioned the appointment of
Directors to the Board is reserved exclusively to the Company’s shareholders, in line with the
general commercial practice in Malta. Shareholders holding 11% or more of the issued
shares are entitled to appoint one director for every 11% holding, whilst the other
shareholders are entitled to appoint the remaining Board members at the Annual General
Meeting in accordance with the provisions of the Articles of Association. Thus the Company
considers that the procedure is already sufficiently defined and the requirements of
transparency are also well-met without the need for the establishment of a formal
Nomination Committee at this stage.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
32
Corporate Governance Statement - continued
3.Non-compliance with the code - continued
Principle 9 – Relations with Shareholders and with the Market
Code Provision 9.3 recommends the Company to have a mechanism in place to resolve
conflicts between minority shareholders and controlling shareholders.
The balance between the interests of all shareholders is a matter that is kept under continuous
review by the Board and is consistently evaluated in the interest of all shareholders.
Therefore, although the Company does not have a specific mechanism in place there is open
dialogue between Management and all the non-Executive Directors of the Company to this
end. The Company also has a good relationship with the Malta Association for Small
Shareholders and the Board maintains an open door policy with them, as well as with any
individual shareholders who may be interested in making direct submissions to the Company,
at all times through the Office of the Company Secretary.
In light of this, and as the Company is mindful of the protection granted to minority
shareholders in terms of the Companies Act (Cap. 386 of the Laws of Malta) by which it
would necessarily be bound to abide, the Company is of the opinion that no formal
procedures to resolve conflict between minority and controlling shareholders are necessary at
this stage.
Internal Control and Risk Management System
This information is being provided in terms of Capital Markets Rule 5.97.4.
While authority to manage the daily business of the Company is delegated to the CEO within
the limits set by the Board, the Board is ultimately responsible for the Company’s internal
control systems and for ensuring their effectiveness. Such systems are designed to manage,
rather than eliminate, the risks associated with achieving business objectives and can only
provide reasonable (as opposed to absolute) assurance against material misstatement or loss.
The Company manages its internal risk through the ‘three lines of defence’ approach,
ensuring achievement of commercial aims while continuing to meet all legal and regulator
requirements. These then feed into the Board through the Audit Committee and the Risk and
Compliance Committee in order for the Board to maintain oversight of the processes and
procedures ensuring the effectiveness of the systems of internal control.
The key features of the Company’s systems of internal control are as follows:
Organisation - The Company has clear reporting lines from the Boards of Directors of
subsidiary and associated companies. The MMS Chairman is also kept informed as to the
operations of the subsidiary companies either by sitting directly on the respective Boards or
through the other Company Directors and Senior Management who sit on the Company and
subsidiary boards, Management and Operational Committees.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
33
Corporate Governance Statement - continued
Internal Control and Risk Management System - continued
Risk Identification - The respective Management of each of the Group companies is
responsible for the identification and evaluation of key risks applicable to their areas of
business. The Board reviews its Risk Management policies and strategies and oversees their
implementation to ensure that identified key risks are properly assessed and managed. The
risk based nature of the Solvency II regime requires the company to have an effective risk
management system in place to identify, measure, manage, monitor and report on the main
risks which could impact the entity. This process is embodied in the annual ORSA (Own
Risk and Solvency Assessment) process. Expert judgements, stress testing and sensitivity
analysis are important elements in the company’s risk identification framework embedded in
the ORSA process. The ORSA report is submitted to the competent Authority on an annual
basis after approval of the Risk and Compliance Committee and ultimately of the Board of
Directors.
Reporting - Functional, operating and financial reporting standards are applicable to all
entities of the Group. Systems and procedures are in place to identify, control and report on
the major risks. The Board receives periodic management information giving comprehensive
analysis of financial and business performance including variances against budgets.
General Meetings
This information is being provided in terms of Capital Markets Rule 5.97.6.
The General Meeting is the Company’s most supreme decision-making organ and its
functions are governed by, and conducted in accordance with, the Company’s Articles of
Association. The General Meeting is called with not less than twenty-one days' notice in
writing. In addition to any matters which would be deemed to constitute “special business”,
the annual general meeting deals with matters of a recurring nature namely, the declaration of
a dividend, the consideration of the accounts, statements of financial position and reports of
the directors and auditors, the election of directors, the appointment of the auditors and the
authorisation of the directors to set their remuneration. The Memorandum and Articles of the
Company may be amended by means of an extraordinary resolution (as defined in the
Articles) of the Company during general meetings.
The Board of Directors is responsible for developing the agenda for the AGM and sending it
to the shareholders.
Shareholders’ rights can be exercised in accordance with the Articles of the Company, the
Companies Act and the Capital Markets Rules. Accordingly, all shareholders registered in the
Shareholders’ Register on the Record Date as defined in the Capital Markets Rules, have the
right to attend, participate and vote in the general meeting. A shareholder or shareholders
holding not less than 5% of the nominal value of all the shares entitled to vote at the General
Meeting may request the Company to include items on the agenda of a General Meeting and /
or table draft resolutions for items included in the agenda of a general meeting. Such requests
are to be received by the Company at least forty-six days before the date set for the relative
General Meeting.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
34
Corporate Governance Statement - continued
General Meetings - continued
A shareholder who cannot participate in the General Meeting can appoint a proxy by written
or electronic notification to the Company. Every shareholder represented in person or by
proxy is entitled to ask questions which are pertinent and related to items on the agenda of the
General Meeting and to have such questions answered by the Directors or such persons as the
Directors may delegate for that purpose.
In view of the pandemic environment in the first half of 2022, particularly bearing in mind
health and safety aspects and the restrictions in place, the AGM was held remotely on 29
April 2022 in accordance with Legal Notice 288 of 2020 and live streamed. It however
remains the intention of the Company to revert to the holding of a physical AGM henceforth
to enable active participation by all those having an interest in doing so and to allow the
shareholders proper opportunity to engage with the Company Directors and members of
Management.
Signed by Martin Galea (Chairman) and Antoinette Caruana (Director) on the 22 March
2023
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
35
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders
1.Terms of Reference and Membership
In accordance with Section 8A of The Code of Principles of Good Corporate Governance
(Appendix 5.1 of the Capital Markets Rules under Chapter 5 on Continuing obligations), the
Remuneration Committee ("'the Committee") of MAPFRE Middlesea p.l.c.("MMS" or "the
Company") hereby submits the Remuneration Statement and Report to the shareholders of
MMS.
The Committee’s main task is to ensure that the MMS Remuneration Policy is implemented
and to propose appropriate remuneration packages for Directors and Chief Officers in
accordance therewith. The Remuneration Committee also monitors the level and structure of
the remuneration packages for Directors and Chief Officers based on the information
presented by Management from time to time.
As at 1 January 2022 the Committee Members were Jose Ramon Alegre (Chairman), John
Cassar White and Antoinette Caruana. John Cassar White did not submit his nomination to
the Board of Directors for re-election at the Company's Annual General Meeting ("AGM")
held on the 29 April 2022, and thus, at the Board meeting held directly after the AGM, Jose
Ramon Alegre, Antoinette Caruana and Robert Suban were appointed as the members of the
Remuneration Committee. Jose Ramon Alegre was once again appointed Chairman.
All the Committee Members are non-Executive Directors of MMS with no personal financial
interest as recommended by Code provision 8.A.1. The MMS President & CEO, Javier
Moreno, the MAPFRE MSV Life p.l.c (MMSV) CEO, Etienne Sciberras and other members
of senior management were invited to attend Committee meetings as and when required. The
Company Secretary, Dr Daphne Sims Dodebier, acted as the Secretary to the Committee.
Code provision 8.A.1 recommends that an independent non-Executive Director chairs the
Committee. The Committee takes decisions by the unanimous agreement of its Members.
Therefore, even though the Committee is not chaired by an independent non-Executive
Director, the Director chairing the Committee is non-Executive and his vote does not sway
the outcome of discussions and decisions taken by the Committee.
2.Meetings
The Remuneration Committee held two meetings during the period under review and the
attendance was as follows:
Member Attended
Jose Ramon Alegre (Chairman) 2
Antoinette Caruana 2
John Cassar White (Member until 29 April 2022) 1
Robert Suban (Member from 29 April 2022) 1
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
36
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
2.Meetings - continued
The Committee determined and/or discussed the following matters:
•New & Temporary Senior Management Appointments:
•HR Reports;
•Proposed MAPFRE Malta Employee Pension Scheme:
•Remuneration for Directors, CEO and Senior Management for 2022;
•2022 Variable remuneration framework;
•Collective Agreement Amendments:
•Remuneration Statement for the Annual Report
3. Remuneration Statement
a.Remuneration Policy - Senior Management
The MMS Remuneration Policy framework is set by the Board of Directors acting through
the Remuneration Committee and is based on the guidelines and principles contained within
the MAPFRE Group Compensation (Remuneration) Policy which was approved by the
majority of shareholders during the Annual General Meeting held on 27 October 2020.
The Committee reviews and approves the individual remuneration arrangements for Senior
Management, namely, the President & CEO, the Chief Financial Officer, the Company
Secretary, the Chief Officers and the Internal Auditor.
The Committee has access to both internal and independent external advice on remuneration
matters as and when required.
The Committee deems the current Senior Management remuneration packages to be in line
with the local market equivalents and holds them to be fair, reasonable and commensurate to
the responsibilities involved. The Committee also believes that the remuneration packages
are such as to enable the Company to attract, retain and motivate employees having the
appropriate skills and qualities to ensure the proper management of the organisation.
There have been no significant changes to the Company’s Remuneration Policy for Senior
Management during the financial year under review save for the introduction of the
MAPFRE Malta Employees WorkSave Pension Scheme (the "Pension Scheme"), during the
second half of the financial year.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
37
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
a.Remuneration Policy – Senior Management - continued
The Pension Scheme is voluntary and intended to provide employees with an opportunity to
build up on their retirement savings during their employment. All employees of the
Company, including Senior Management, but excluding Directors, are eligible to be enrolled
in Pension Scheme, provided that they have been in employment with the Company for at
least two years. Those employees who opt to participate in the Pension Scheme, determine
their own monthly contribution between the minimum and the maximum amounts established
by the Pension Scheme's Terms and Conditions. In return, the Company makes contributions
into the accounts of these employees who would have opted to participate in the Pension
Scheme and shall contribute twice the amount contributed by the employee subject to a
maximum based on duration of service, which is also established in the Pension Scheme's
Terms and Conditions. Please refer to Note 11 in the Financial Statements below, for further
information with regard to the contributions made by the Company in this regard.
On the other hand, the performance appraisal system underpinning the Company’s
remuneration structure was implemented in 2013 and the performance bonus scheme
implemented in 2014. The latter is reviewed and further enhanced as necessary on an annual
basis. Both the appraisal system and the bonus scheme remain applicable in 2022. The said
performance bonus scheme is still based on the achievement of Group, Company and
Departmental objectives and was further enhanced in 2019 to give some weight to the
adherence to Corporate Values. In Financial Year 2020 the performance appraisal system was
upgraded to a new tool which allows for the generation of 360 degree feedback between
peers and internal clients and continuous communication between employees and their direct
managers throughout the year making the performance evaluation a lot more holistic.
The terms and conditions of employment for Senior Management are set out in their
respective contracts of employment. In principle, these contracts do not contain provisions
for termination payments or other amounts linked to early termination nor have there been
any cases of early termination in practice. Share options, pension benefits, save for that
herein provided in relation to the Pension Scheme, and profit sharing are not part of the MMS
Remuneration Policy for Senior Management. Indeed, Senior Management is not entitled to
any compensation of a variable nature except the performance bonus set out hereunder.
The MMS President & CEO is eligible for an annual bonus entitlement calculated with
reference to the attainment of pre-established objectives and targets as recommended by the
Remuneration Committee and approved by the Board of Directors.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
38
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
a.Remuneration Policy – Senior Management - continued
Senior Management are eligible for a performance bonus calculated in accordance with the
percentage achievement of the Group and Departmental objectives as per the performance
bonus scheme aforementioned which is inter alia approved by the Remuneration Committee
and determined in accordance with the performance appraisal process. Save for that herein
provided in relation to the Pension Scheme, no supplementary pension or other pension
benefits are payable to Senior Management. Additionally, in 2022, a right of clawback has
been introduced for Key Staff where, if the relevant Variable Remuneration attains one of
two quantitative criteria, 30% of the said Variable Remuneration would be deferred.
Both in the case of the MMS President & CEO, and for Senior Management, the
Remuneration Committee is of the view that the proportion of fixed remuneration to
performance bonus is also reasonable and appropriate.
Non-cash benefits to which Senior Management are entitled include the use of a company car
and health insurance. The death-in-service benefit also forms part of the non-cash benefits
and the same terms are applicable to all other Company employees.
Total emoluments received by Senior Management during Financial Year 2022 are deemed
to be of a commercially sensitive nature and are thus not being disclosed in this Report in line
with Code Provision 8.A.6.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
39
Remuneration Statement and Report of the Remuneration Committee to
the shareholders - continued
3.Remuneration Statement - continued
b.Remuneration Policy – Directors
As at 31 December 2022, the Board of Directors of MAPFRE Middlesea p.l.c. was composed
of nine non-Executive directors. Three Directors, namely Jose Ramon Alegre, Jose-Luis
Jimenez and Jose Maria del Pozo, did not receive a fee in accordance with the established
policy of the MAPFRE Group with which they are employed and which appointed them.
Etienne Sciberras, appointed as from the AGM held on 29 April 2022, also did not receive a
fee since during Financial Year 2022 he occupied the position of Chief Executive Officer of
MAPFRE MSV Life p.l.c. (a subsidiary of MMS)
Based on the recommendations of the Committee, the current Directors’ fees, for each
Director as applicable, and as approved by the Board are as follows:
Directors’ Fees including Board Committees as applicable
Chairman€60,000 per annum (2021: €60,000)
Other Directors (per Director)€40,000 per annum (2021: €40,000)
Audit Committee Fees
Chairman€7,000 per annum (2021: €5,000)
Member (per member)€5,000 per annum (2021: €3,000)
Subsidiary Fees
Chairman€7,000 per annum (2021: €5,000)
Member (per member)€5,000 per annum (2021: €3,000)
None of the Company’s Directors had any service contracts with either the Company or any
of its subsidiaries as at the end of the Financial Year.
Directors’ emoluments are established to reflect the responsibility and time committed by
Directors to the affairs of the Company, including the Board Committees of which a Director
may be a member save for the Audit Committee that is additionally remunerated as detailed
above. None of the Directors, in their capacity as Director of the Company and/or Committee
members, are entitled to profit sharing, share options, pension benefits, participation in the
Employee Pension Scheme or any other remuneration.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
40
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
c.Code Provision 8.A.5
Directors' Emoluments 2022

Fixed Remuneration | Variable Remuneration | Share Options | Others
€307,350 | None | None | None

Fees payable to directors in respect of 2022 amounted in total to €307,350 (2021: €288,500).
The emoluments of Senior Management are not being disclosed in line with Code Provision
8.A.6 since these are deemed to be of a commercially sensitive nature. This decision will
continue to be reviewed on an annual basis.
d.Code Provision 12.26K
In addition to the information provided above and with reference to Appendix 12.1 of the
Capital Markets Rules it is noted that the maximum annual aggregate emoluments that may
be paid to the Directors are approved by the shareholders in the General Meeting in terms of
Article 81 of the Company’s Articles of Association. This amount was established by the
Board of Directors after consultation with the MAPFRE Group and based on the guidelines
as set forth in the Compensation Policy relative to the fixing of compensation for the non-
Executive members of the governance bodies having regard to the Company’s financial
situation, profitability and sustainability. The maximum annual aggregate amount was then
confirmed in the total sum of €350,000 per annum at the forty-first Annual General Meeting
held on the 29 April 2022, which has remained consistent since 2018.
The amount paid to each Director by the Company for attendance at meetings of the Board or
of the Board Committees, when due as explained above, is not tied to the Company’s
performance or other performance criteria but is a pre-determined, fixed annual amount as
indicated below:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
41
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
d.Code Provision 12.26K - continued

Director | 2022 Fees € | 2021 Fees € | Percentage Annual Change of Remuneration %
|  |  | 2021-2022 | 2020-2021
Jose Ramon Alegre (NED) | nil | nil | n/a | n/a
Alfred Attard (NED until 30 April 2021)1 | nil | 15,000 | n/a | 0.00
Antoinette Caruana (NED) | 45,000 | 43,000 | 4.65 | 0.00
John Cassar White (NED until 29 April 2022)2 | 13,333 | 39,167 | (55.56) | n/a
Gordon Cordina (NED from 29 April 2022)3 | 54,683 | nil | n/a | n/a
Jose Maria del Pozo (NED) | nil | nil | n/a | n/a
Martin Galea (NED)4 | 68,000 | 69,333 | 4.81 | 1.96
Jose Luis Jimenez (NED) | nil | nil | n/a | n/a
Taddeo Scerri (NED until 29 April 2022) | 15,000 | 42,000 | 4.65 | 5.00
Etienne Sciberras (NED from 29 April 2022)5 | nil | nil | n/a | n/a
Robert Suban (NED from 29 April 2022) | 26,667 | nil | n/a | n/a
Paul Testaferrata Moroni Viani (NED) | 40,000 | 40,000 | 0.00 | (6.98)
Joseph F.X. Zahra (NED until 29 April 2022)6 | 44,667 | 40,000 | 17.50 | 0.00
Total | 307,350 | 288,500 |  |

1 In the case of Mr Alfred Attard €7,917 of the amount for 2021 was paid to Bank of Valletta
p.l.c. as Mr Attard’s employer based on a separate agreement for services rendered.
2 The amount includes €12,500 paid to John Cassar White for his position as Chairman of the
subsidiary Board till 31 March 2021, with €5,000 of the amount paid to Bank of Valletta
p.l.c. as Mr Cassar White’s employer based on a separate agreement for services rendered.
3 The amount includes €50,000 paid to Dr Gordon Cordina as Chairman of the subsidiary
Board. From the whole amount €22,349 was paid to Bank of Valletta p.l.c. as Dr Cordina’s
employer based on a separate agreement for services rendered.
4 The amount includes €5,000 paid to Martin Galea in 2021 for the position as Chairman of
the subsidiary’s Audit Committee.
5 Total emoluments for 2022 paid to Mr Etienne Scbiberras as CEO of MAPFRE MSV Life
amounted to €211,444.
6 The amount includes €31,333 paid to Joseph F X Zahra for the position as Director of the
subsidiary's Board and Chairman of the subsidiary's Audit Commitee as from 30 April 2022.
* Percentage annual change of remuneration (2021-2022) was based on annualised
remuneration for 2022 and/or 2021 to allow for a meaningful comparison.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
42
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
d.Code Provision 12.26K - continued
Remuneration paid to Directors as shown in the above table are all fixed in nature and thus
the ratio of fixed and variable remuneration was 100%-0% for both years being reported. The
changes in the total remuneration of Non-Executive Directors is to be considered with the
information included in the table, further down in this report, showing a comparison between
the percentage annual change of remuneration of President & CEO against company
performance metrics and percentage annual change of the Company’s employees’ average
remuneration employed on a full-time basis equivalent.
None of the Directors and Members of the Board Committees held any service contracts with
the Company or any of its subsidiary undertakings and no Director is entitled to share
options, profit sharing, pension benefits or any other type of emoluments save for the
provision of cover under a Group Life scheme. It is also confirmed that no other fees were
payable or paid to any of the Directors or Committee Members during the financial year
under review.
By reference to Capital Markets Rule 12.2A no other person is deemed to be in charge of the
operations or the activities of the Company, and thus fall within the definition of director,
beyond the members of the Board and the Chief Executive Officer.
In this respect and relative to Appendix 12.1 the total emoluments paid by the Company to
the Chief Executive Officer in office during Financial Year 2022 were as follows:

| Financial Year
| 2022 | 2021
| € | €
President & CEO |  |
Javier Moreno Gonzalez |  |
Fixed Salary | 184,500 | 135,000
Defined pension contribution | 41,985 | 30,375
Other fringe benefits | 106,644 | 84,262
Total Fixed remuneration | 333,129 | 249,637
Variable remuneration | 116,320 | 97,817
Total remuneration | 449,449 | 347,454
Fixed Variable Proportion | 74%-26% | 72%-28%

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
43
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
d.Code Provision 12.26K - continued
In respect of Variable Remuneration, deferred or otherwise, paid or pending payment, a
partial or total reduction is possible if particular circumstances arise including in the event of
a restatement of annual accounts other than resulting from a change in legislation and in the
event of fraud. No such occurrence took place in 2022.
Variable remuneration for the President & CEO is based on Global, Regional and Country
results together with Country premium written targets, with the highest weighting given to
the Country results and premiums respectively. The main objective of the Group is profitable
Growth and the targets are aligned with such objectives. As part of a Global Group it is
expected that as a Country we contribute towards the profitability of both the Region and the
Global Group results and accordingly part of the variable remuneration is attached to the
achievement of the higher Group results. The achievement percentage follows a set scale
going from complete non-achievement, to pro-rata if not fully achieved, to accelerated
achievement if targets are exceeded. These scales are in line with the Remuneration Policy
and approved accordingly by the Remuneration Committee. In terms of the requirements
within Appendix 12.1 of the Capital Markets Rules, the following table presents the annual
change of remuneration of the President & CEO, of the Company’s performance, and of
average remuneration on a full-time equivalent basis of the Company’s employees over the
two most recent financial years:

Performance indicators | % Difference FY2022-FY2021 | % Difference FY2021-FY2020
Company's profit after tax | 45.3%* | (36.64)%
Company's gross premium written | 8.75% | 6.64%
Remuneration of Company's President & CEO | (2.98)%** | 1.90%
Company's employees' average remuneration on full time equivalent | 3.39% | 6.44%
Group's employees' average remuneration on full time equivalent | 3.01% | 5.54%

* The increase arose from 2022 being favourably impacted by the receipt of a net 1.00
million in dividend from MAPFRE MSV Life p.l.c. and a 0.54 million recovery of an amount
previously impaired in relation to an amount due from Progress Assicurazioni S.p.A..
** For comparison purpose, since Javier Moreno Gonzalez's appointment began on 1 April
2021, his 2021 remuneration has been annualised.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
44
Remuneration Statement and Report of the Remuneration Committee to
the Shareholders - continued
3.Remuneration Statement - continued
d.Code Provision 12.26K - continued
In terms of the requirements within Appendix 12.1 (f) there has been no deviation from the
procedure for the implementation of the remuneration policy as defined in Chapter 12 of the
Capital Markets Rules.
As required by provision 12.26N of the Capital Markets Rules the Company’s auditors have
verified that the information that needs to be included in the Remuneration Report as per
Chapter 12 and Appendix 12.1 of the Capital Markets Rules, has been included.
Signed by Antoinette Caruana (Director and Remuneration Committee Member) on 22
March 2023
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
45
Statement of profit or loss
Technical account - general business

|  |  |  | Year ended 31 December |
|  |  |  | Group and Company |
|  |  |  | 2022 | 2021 |
| Notes |  |  | €’000 | €’000 |
Earned premiums, net of reinsurance |  |  |  |  |  |
Gross premiums written | 6 |  |  | 84,439 | 77,613 |
Outward reinsurance premium |  |  |  | (15,166) | (15,350) |
Net premiums written |  |  |  | 69,273 | 62,263 |
Change in gross provision for unearned premiums |  |  |  | (2,679) | (2,979) |
Change in the provision for unearned premiums, reinsurers' share |  |  |  | (54) | 1,434 |
|  |  |  | (2,733) | (1,545) |
Earned premiums, net of reinsurance |  |  |  | 66,540 | 60,718 |
Allocated investment return transferred from the non-technical account | 8 |  |  | (171) | 307 |
Total technical income |  |  |  | 66,369 | 61,025 |
Claims incurred, net of reinsurance |  |  |  |  |  |
Claims paid |  |  |  |  |  |
- gross amount |  |  |  | 42,336 | 37,134 |
- reinsurers' share |  |  |  | (7,011) | (5,524) |
|  |  |  | 35,325 | 31,610 |
Change in the provision for claims |  |  |  |  |  |
- gross amount |  |  |  | 400 | 2,964 |
- reinsurers' share |  |  |  | 3,014 | 313 |
|  |  |  | 3,414 | 3,277 |
Claims incurred, net of reinsurance |  |  |  | 38,739 | 34,887 |
Net operating expenses | 7 |  |  | 22,867 | 20,878 |
Total technical charges |  |  |  | 61,606 | 55,765 |
Balance on the technical account for general business |  |  |  | 4,763 | 5,260 |

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
46
Statement of profit or loss - continued
Technical account - long term business

|  | Year ended 31 December
|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
| Notes | €’000 | €’000 | €’000 | €’000
Earned premiums net of reinsurance |  |  |  |  |
Gross premiums written | 6 | 251,439 | 327,632 | 2,680 | 2,497
Outwards reinsurance premiums |  | (3,558) | (3,390) | (225) | (211)
Earned premiums net of reinsurance |  | 247,881 | 324,242 | 2,455 | 2,286
Investment return |  |  |  |  |
Return from investments | 8 | (286,614) | 97,458 | (49) | (11)
Other technical income, net of reinsurance | 9 | 743 | 788 | — | —
Total technical income |  | (37,990) | 422,488 | 2,406 | 2,275
Claims incurred, net of reinsurance |  |  |  |  |
Claims paid |  |  |  |  |
- gross amount |  | 295,532 | 305,907 | 839 | 1,250
- reinsurers' share |  | (1,507) | (1,859) | — | (122)
|  | 294,025 | 304,048 | 839 | 1,128
Change in the provision for claims |  |  |  |  |
- gross amount |  | 1,079 | 2,339 | (243) | (143)
- reinsurers' share |  | 457 | (319) | — | 113
|  | 1,536 | 2,020 | (243) | (30)
Claims incurred, net of reinsurance |  | 295,561 | 306,068 | 596 | 1,098
Change in other technical provisions, net of reinsurance |  |  |  |  |
Long term business provision, net of reinsurance |  |  |  |  |
- gross amount |  | (104,057) | (24,367) | 68 | (67)
Investments contracts with DPF - gross |  | (266,314) | 103,203 | — | —
|  | (370,371) | 78,836 | 68 | (67)
Net operating expenses | 7 | 18,251 | 18,572 | 421 | 328
Total technical charges |  | (56,559) | 403,476 | 1,085 | 1,359
Balance on the technical account for long term business |  | 18,569 | 19,012 | 1,321 | 916

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
47
Statement of profit or loss - continued
Non-technical account

|  | Year ended 31 December
|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
| Notes | €’000 | €’000 | €’000 | €’000
Balances on technical accounts |  |  |  |  |
General business |  | 4,763 | 5,260 | 4,763 | 5,260
Long term business |  | 18,569 | 19,012 | 1,321 | 916
Total income from insurance activities |  | 23,332 | 24,272 | 6,084 | 6,176
Other investment income | 8 | 1,084 | 956 | 2,182 | 1,107
Investment expenses and charges | 8 | (1,251) | (675) | (1,040) | (659)
Allocated investment return transferred |  |  |  |  |
to the general business technical account | 8 | 171 | (307) | 171 | (307)
Revaluation loss on freehold land and buildings | 18 | — | (1,521) | — | —
Other income | 9 | 1,135 | 1,438 | — | —
Administrative expenses | 7 | (2,829) | (3,773) | (1,946) | (2,254)
Reversal of impairment in group undertaking |  | 540 | — | 540 | —
Profit for the financial year before tax |  | 22,182 | 20,390 | 5,991 | 4,063
Tax expense | 12 | (7,539) | (7,467) | (2,201) | (1,455)
Profit for the financial year |  | 14,643 | 12,923 | 3,790 | 2,608
Attributable to: |  |  |  |  |
- owners of the Company |  | 8,794 | 7,643 | 3,790 | 2,608
- non-controlling interests |  | 5,849 | 5,280 | — | —
|  | 14,643 | 12,923 | 3,790 | 2,608
Earnings per share attributable to owners of the Company | 14 | €0.096 | €0.083 |  |

The Notes on pages 56 to 198 are an integral part of these financial statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
48

Statement of comprehensive income
|  | Year ended 31 December
|  | Group |  | Company
|  | 2022 | 2021 | 2022 | 2021
| Notes | €’000 | €’000 | €’000 | €’000
Profit for the financial year |  | 14,643 | 12,923 | 3,790 | 2,608
Other comprehensive income: |  |  |  |  |
Items that are or may be reclassified subsequently to profit or loss |  |  |  |  |
Change in fair value of available-for-sale investments | 29 | (770) | 53 | (764) | 51
Available-for-sale investments reclassified to profit or loss | 29 | — | (102) | — | (102)
Revaluation gain on freehold land and buildings | 18 | — | 1,081 | — | —
Items that will not be reclassified to profit or loss |  |  |  |  |
Re-measurement actuarial gain on provision for other liabilities and charges |  | 57 | 2 | 57 | 2
(Decrease)/increase in value of in-force business | 16 | (7,266) | 9,912 | — | —
Total other comprehensive income, net of tax |  | (7,979) | 10,946 | (707) | (49)
Total comprehensive income for the year |  | 6,664 | 23,869 | 3,083 | 2,559
Attributable to: |  |  |  |  |
- owners of the Company |  | 4,448 | 13,633 |  |
- non-controlling interests |  | 2,216 | 10,236 |  |
Total comprehensive income for the year |  | 6,664 | 23,869 |  |

Items disclosed in the statement above are disclosed net of tax.
The Notes on pages 56 to 198 are an integral part of these financial statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
49
Statement of financial position

|  | At 31 December
| Notes | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
ASSETS |  |  |  |  |
Intangible assets | 16 | 107,987 | 109,729 | 9,967 | 9,146
Property, plant and equipment | 18 | 17,626 | 17,657 | 4,480 | 4,542
Right-of-use assets | 17 | 1,461 | 1,802 | 1,378 | 1,685
Investment property | 19 | 108,278 | 110,016 | 13,404 | 13,529
Investment in subsidiary undertakings | 20 | — | — | 77,214 | 77,214
Investment in associated undertakings | 21 | 23,027 | 22,831 | 389 | 383
Other investments | 22 | 1,992,902 | 2,421,911 | 12,097 | 8,382
Deferred income tax | 23 | 8,750 | 2,313 | 1,292 | 1,268
Reinsurers' share of technical provisions | 24 | 29,722 | 33,247 | 29,246 | 32,314
Deferred acquisition costs | 25 | 9,367 | 8,427 | 9,367 | 8,427
Insurance and other receivables | 26 | 33,740 | 32,069 | 20,099 | 19,222
Income tax receivables |  | 42 | 308 | — | —
Cash and cash equivalents | 27 | 137,286 | 71,443 | 11,130 | 11,575
Total assets |  | 2,470,188 | 2,831,753 | 190,063 | 187,687
EQUITY |  |  |  |  |
Capital and reserves attributable to owners of the company |  |  |  |  |
Share capital | 28 | 19,320 | 19,320 | 19,320 | 19,320
Share premium account |  | 688 | 688 | 688 | 688
Other reserves | 29 | 40,189 | 44,817 | 34,171 | 34,935
Retained earnings |  | 52,887 | 46,211 | 22,915 | 21,468
|  | 113,084 | 111,036 | 77,094 | 76,411
Non-Controlling Interest |  | 112,148 | 110,932 | — | —
Total equity |  | 225,232 | 221,968 | 77,094 | 76,411
LIABILITIES |  |  |  |  |
Deferred income tax | 23 | 11,822 | 42,599 | 2,295 | 1,989
Provision for other liabilities and charges | 30 | 854 | 997 | 854 | 997
Technical provisions |  |  |  |  |
- Insurance contracts and investment contracts with DPF | 24 | 2,104,455 | 2,470,668 | 95,909 | 93,005
- investment contracts without DPF | 24 | 55,713 | 60,869 | — | —
Derivative financial instruments | 22 | — | 775 | — | —
Lease Liabilities |  | 1,530 | 1,866 | 1,449 | 1,745
Insurance and other payables | 31 | 28,012 | 31,173 | 12,379 | 13,401
Income tax payable |  | 42,570 | 838 | 83 | 139
Total Liabilities |  | 2,244,956 | 2,609,785 | 112,969 | 111,276
Total equity and liabilities |  | 2,470,188 | 2,831,753 | 190,063 | 187,687

The Notes are an integral part of these financial statements.
These financial statements on pages 46 to 198 were approved by the Board of Directors and
authorised for issue on 22 March 2023 and signed on its behalf by Martin Galea (Chairman)
and Gordon Cordina (Director) as per the Directors' Declaration on ESEF Annual Financial
report submitted in conjunction with the Annual Report 2022.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
50
Statement of changes in equity

Group |  |  |  |  |
|  | Attributable to owners of the Company |  |
|  |  | Share |  |  |  | Non- |
|  | Share | premium | Other | Retained |  | controlling | Total
|  | capital | account | reserves | earnings | Total | interests | equity
| Notes | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000
Balance as at 1 January 2021 |  | 19,320 | 688 | 38,829 | 41,766 | 100,603 | 80,696 | 181,299
Comprehensive income |  |  |  |  |  |  |  |
Profit for the financial year |  | — | — | — | 7,643 | 7,643 | 5,280 | 12,923
Other comprehensive income: |  |  |  |  |  |  |  |
Change in available-for- sale investment's fair value | 29 | — | — | 53 | — | 53 | — | 53
Available-for-sale investments re-classified to profit or loss | 29 | — | — | (102) | — | (102) | — | (102)
Revaluation gain on freehold land and buildings | 18 | — | — | 1,081 | — | 1,081 | — | 1,081
Re-measurement actuarial gain on provision for other liabilities and charges |  | — | — | — | 2 | 2 | — | 2
Increase in value of in- force business | 16 | — | — | 4,956 | — | 4,956 | 4,956 | 9,912
Total other comprehensive income, net of tax |  | — | — | 5,988 | 2 | 5,990 | 4,956 | 10,946
Total comprehensive income |  | — | — | 5,988 | 7,645 | 13,633 | 10,236 | 23,869
Transactions with owners |  |  |  |  |  |  |  |
Increase in share capital of group undertaking |  | — | — | — | — | — | 20,000 | 20,000
Dividends for 2020 |  | — | — | — | (3,200) | (3,200) | — | (3,200)
Total transactions with owners |  | — | — | — | (3,200) | (3,200) | 20,000 | 16,800
Balance at 31 December 2021 |  | 19,320 | 688 | 44,817 | 46,211 | 111,036 | 110,932 | 221,968

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
51
Statement of changes in equity - continued

Group - continued |  |  |  |  |
|  | Attributable to owners of the Company |  |
|  |  | Share |  |  |  | Non- |
|  | Share | premium | Other | Retained |  | controlling | Total
|  | capital | account | reserve s | earnings | Total | interests | equity
| Notes | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000
Balance at 1 January 2022 |  | 19,320 | 688 | 44,817 | 46,211 | 111,036 | 110,932 | 221,968
Comprehensive income |  |  |  |  |  |  |  |
Profit for the financial year |  | — | — | — | 8,794 | 8,794 | 5,849 | 14,643
Other comprehensive income: |  |  |  |  |  |  |  |
Change in available-for- sale investments' fair value | 29 | — | — | (770) | — | (770) | — | (770)
Revaluation gain on freehold land and buildings reclassified to retained earnings |  | — | — | (225) | 225 | — | — | —
Re-measurement actuarial gain on provision for other liabilities and charges |  | — | — | — | 57 | 57 | — | 57
Decrease in value of in- force business | 16 | — | — | (3,633) | — | (3,633) | (3,633) | (7,266)
Total other comprehensive income, net of tax |  | — | — | (4,628) | 282 | (4,346) | (3,633) | (7,979)
Total comprehensive income |  | — | — | (4,628) | 9,076 | 4,448 | 2,216 | 6,664
Transactions with owners |  |  |  |  |  |  |  |
Dividend for 2021 |  | — | — | — | (2,400) | (2,400) | (1,000) | (3,400)
Total transactions with owners |  | — | — | — | (2,400) | (2,400) | (1,000) | (3,400)
Balance at 31 December 2022 |  | 19,320 | 688 | 40,189 | 52,887 | 113,084 | 112,148 | 225,232

The Notes on pages 56 to 198 are an integral part of these financial statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
52
Statement of changes in equity - continued

Company |  |  |  |  |  |  |  |
|  |  | Share |  |  |  |  |
|  | Share | premium | Other | Retained |  |  |
|  | capital | account | reserves | earnings | Total |  |
| Notes | €’000 | €’000 | €’000 | €’000 | €’000 |  |
Balance at 1 January 2021 |  | 19,320 | 688 | 34,986 | 22,058 | 77,052 |  |
Comprehensive income |  |  |  |  |  |  |  |
Profit for the financial year |  | — | — | — | 2,608 | 2,608 |  |
Other comprehensive income: |  |  |  |  |  |  |  |
Change in available-for-sale investments' fair value |  | — | — | 51 | — | 51 |  |
Available-for-sale investments- reclassified to profit or loss | 29 | — | — | (102) | — | (102) |  |
Re-measurement actuarial gain on provision for other liabilities and charges | 29 | — | — | — | 2 | 2 |  |
Total other comprehensive income, net of tax |  | — | — | (51) | 2 | (49) |  |
Total comprehensive income |  | — | — | (51) | 2,610 | 2,559 |  |
Transactions with owners |  |  |  |  |  |  |  |
Dividends for 2020 |  | — | — | — | (3,200) | (3,200) |  |
Total transactions with owners of the Company |  | — | — | — | (3,200) | (3,200) |  |
Balance at 31 December 2021 |  | 19,320 | 688 | 34,935 | 21,468 | 76,411 |  |

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
53
Statement of changes in equity - continued

Company - continued |  |  |  |  |  |  |  |
|  |  | Share |  |  |  |  |
|  | Share | premium | Other | Retained |  |  |
|  | capital | account | reserves | earnings | Total |  |
| Notes | €’000 | €’000 | €’000 | €’000 | €’000 |  |
Balance at 1 January 2022 |  | 19,320 | 688 | 34,935 | 21,468 | 76,411 |  |
Comprehensive income |  |  |  |  |  |  |  |
Profit for the financial year |  | — | — | — | 3,790 | 3,790 |  |
Other comprehensive income: |  |  |  |  |  |  |  |
Change in available-for-sale investments' fair value | 29 | — | — | (764) | — | (764) |  |
Re-measurement actuarial gain on provision for other liabilities and charges |  | — | — | — | 57 | 57 |  |
Total other comprehensive income, net of tax |  | — | — | (764) | 57 | (707) |  |
Total comprehensive income |  | — | — | (764) | 3,847 | 3,083 |  |
Transactions with owners |  |  |  |  |  |  |  |
Dividend for 2021 |  | — | — | — | (2,400) | (2,400) |  |
Total transactions with owners of the Company |  | — | — | — | (2,400) | (2,400) |  |
Balance as at 31 December 2022 |  | 19,320 | 688 | 34,171 | 22,915 | 77,094 |  |

The Notes on pages 56 to 198 are an integral part of these financial statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
54
Statement of cash flows

|  | Year ended 31 December |  |
|  | Group | Company |  |
|  | 2022 | 2021 | 2022 | 2021 |  |
| Notes | €’000 | €’000 | €’000 | €’000 |  |
Cash flows from operating activities |  |  |  |  |  |  |
Cash (used in)/generated from operations | 32 | (64,364) | 9,360 | 11,262 | 12,414 |  |
Dividends received |  | 10,519 | 9,572 | 1,347 | 168 |  |
Interest received |  | 17,729 | 21,296 | 97 | 96 |  |
Interest paid |  | (27) | (66) | (27) | (66) |  |
Income tax paid |  | (2,770) | (2,501) | (1,944) | (2,742) |  |
Net cash (used in)/generated from operating activities |  | (38,913) | 37,661 | 10,735 | 9,870 |  |
Cashflow from investing activities |  |  |  |  |  |  |
Purchase of investment property | 19 | (936) | (1,627) | (76) | (4) |  |
Disposal of investment property |  | 113 | 16 | 9 | 16 |  |
Increase in investment in group undertaking |  | — | — | — | (20,000) |  |
Purchase of financial investments |  | (1,319,341) | (1,382,857) | (5,135) | (5,131) |  |
Disposal of financial investments |  | 1,437,912 | 1,312,522 | 183 | 2,116 |  |
Purchase of property, plant and equipment and intangible assets |  | (9,592) | (8,227) | (3,761) | (3,524) |  |
Disposal of property, plant and equipment and intangibles assets |  | — | 95 | — | — |  |
Net cash (used in)/ generated from investing activities |  | 108,156 | (80,078) | (8,780) | (26,527) |  |
Cash flows from financing activities |  |  |  |  |  |  |
Increase in share capital of group undertaking |  | — | 20,000 | — | — |  |
Dividends paid to owners of the Company |  | (2,400) | (3,200) | (2,400) | (3,200) |  |
Dividends paid to minority interests |  | (1,000) | — | — | — |  |
Cash used in from financing activities |  | (3,400) | 16,800 | (2,400) | (3,200) |  |
Net movement in cash and cash equivalents |  | 65,843 | (25,617) | (445) | (19,857) |  |
Movement in cash and cash equivalents |  |  |  |  |  |  |
Cash and cash equivalents at beginning of year |  | 71,443 | 97,060 | 11,575 | 31,432 |  |
Cash and cash equivalents at end of year | 27 | 137,286 | 71,443 | 11,130 | 11,575 |  |

The Notes on pages 56 to 198 are an integral part of these financial statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
55
Notes to the financial statements
1.Basis of preparation
The financial statements of MAPFRE Middlesea p.l.c. are prepared in accordance with
International Financial Reporting Standards as adopted for use in the European Union
and the Companies Act, 1995. The financial statements of the Group to which the
Company is parent are prepared in accordance with article 4 of Regulation 1606/2002/
EC (the “Regulation”) which requires that, for each financial period starting on or after
1 January 2005, companies governed by the law of an EU Member State shall prepare
their consolidated financial statements in conformity with IFRS as adopted by the EU
if, at their reporting date, their securities are admitted to trading on a regulated market
of any EU Member State. The Regulation prevails over the provisions of the Companies
Act, 1995 to the extent that the said provisions of the Companies Act, 1995 are
incompatible with the provisions of the Regulation. Both sets of financial statements as
referred to in the Annual Report relate to both those of the Company and the Group and
have also been prepared in accordance with the Insurance Business Act, 1998.
The financial statements are prepared under the historical cost convention as modified
by the measurement at fair value of: investment property, financial assets and financial
liabilities (including derivatives) at fair value through profit or loss, and available-for-
sale investments. Investment in associated undertaking is measured using equity
method, that is, cost plus or minus net income or loss of associate.
As permitted by IFRS 4 'Insurance Contracts' the Group continues to apply existing
accounting practices for value of in-force business, insurance and participating
investment contracts, modified as appropriate to comply with the IFRS framework and
applicable standards. Further details are given in the respective accounting policies.
The preparation of financial statements in conformity with the above reporting
framework requires the use of certain accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in Note 3.
The statements of financial position are organised in increasing order of liquidity, with
additional disclosures on the maturity analysis of the Group’s assets and liabilities
provided within the Notes to the financial statements. All amounts in the Notes are
shown in thousands of euro, rounded to the nearest thousand, unless otherwise stated.
Certain corresponding information in the disclosures have been reclassified or enhanced
to conform with the current year's presentation.
Standards, interpretations and amendments to published standards effective in 2022
In 2022, the Group adopted new standards, amendments and interpretations to existing
standards that are mandatory for the Group’s accounting period beginning on 1 January
2022. The adoption of these revisions to the requirements of IFRSs as adopted by the
EU did not result in substantial changes to the Group’s accounting policies.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
56
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards effective before
2022 for which the Group elected for the temporary exemption
a. IFRS 9 Financial Instruments
IFRS 9 ‘Financial Instruments’ is effective for annual periods beginning on or after 1
January 2018, with early adoption permitted. However, the Group has met the relevant
criteria and has applied the temporary exemption from IFRS 9 for annual periods before
1 January 2023. Consequently, the Group will apply IFRS 9 for the first time on 1
January 2023.
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and
recognition of financial assets and financial liabilities. It replaces the guidance in IAS
39 that relates to the classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes three primary
measurement categories for financial assets: amortised cost, fair value through other
comprehensive income and fair value through profit or loss. The basis of classification
depends on the entity’s business model and the contractual cash flow characteristics of
the financial asset. Investments in equity instruments are required to be measured at fair
value through profit or loss with the irrevocable option at inception to present changes
in fair value in OCI not recycling.
The new expected credit losses model replaces the incurred loss impairment model used
in IAS 39. For financial liabilities there were no changes to classification and
measurement except for the recognition of changes in own credit risk in other
comprehensive income, for liabilities designated at fair value through profit or loss. The
Group is considering the implications of the standard and its impact on the financial
results and position once adopted.
IFRS 9 became effective for years beginning on or after 1 January 2018. However, in
September 2016, the International Accounting Standards Board issued amendments to
IFRS 4 which provide optional relief to eligible insurers in respect of IFRS 9.
The option permits entities whose predominant activity is issuing insurance contracts
within the scope of IFRS 4, a temporary exemption to defer the implementation of IFRS
9.
Entities that apply the optional temporary relief were initially required to adopt IFRS 9
on annual periods beginning on or after 1 January 2021. However, on 14 November
2018 and subsequently on 17 March 2020 the IASB deferred both the effective date of
IFRS 17, ‘Insurance Contracts’, and the expiry date for the optional relief in respect of
IFRS 9 to 1 January 2022 and subsequently by another year. Therefore, entities that
apply the optional temporary relief will be required to adopt IFRS 9 on 1 January 2023
which aligns with the new effective date of IFRS 17.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
57
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards effective before
2022 for which the Group elected for the temporary exemption - continued
a. IFRS 9 Financial Instruments - continued
The Group evaluated its liabilities at 31 December 2015, the prescribed date of
assessment under the optional temporary relief provisions and concluded that all of the
liabilities were predominantly connected with insurance. More than 90% of the Group’s
liabilities at 31 December 2015 were liabilities arising from contracts within the scope
of IFRS 4. The Group’s predominant activities were and still are insurance related as
evidenced through revenues reported in this Annual Report.
Further to the above, the Group has not previously applied IFRS 9. Therefore, the
Group is an eligible insurer that qualifies for optional relief from the application of
IFRS 9. As at 1 January 2018, the Group has elected to apply the optional temporary
relief under IFRS 4 that permits the deferral of the adoption of IFRS 9 for eligible
insurers. The Group will continue to apply IAS 39 until the financial reporting period
ending 31 December 2022. However, the subsidiaries and associates of the Group, not
having their activities predominantly in insurance, have applied IFRS 9 from 1 January
2018. The subsidiaries disclose references to IFRS 9 information that is not provided in
the consolidated financial statements but is publicly available for the relevant period in
the individual financial statements of the subsidiaries or associates.
i. Financial assets and liabilities – Classification
The classification of financial assets under IFRS 9 is generally based on the business
model in which a financial asset is managed and its contractual cash flow
characteristics. IFRS 9 includes three principal measurement categories for financial
assets – measured at amortised cost, fair value through other comprehensive income
(FVOCI) and fair value through profit or loss (FVTPL) – and eliminates the previous
IAS 39 categories of held-to-maturity investments, loans and receivables, and available-
for-sale financial assets.
A financial asset is measured at amortised cost if it meets both of the following
conditions and is not designated as measured at FVTPL:
•it is held within a business model whose objective is to hold assets to collect
contractual cash flows; and
•its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
A financial asset is measured at FVOCI if it meets both of the following conditions and
is not designated as measured at FVTPL:
•it is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
58
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards effective before
2022 for which the Group elected for the temporary exemption - continued
a. IFRS 9 Financial Instruments - continued
i. Financial assets and liabilities – Classification - continued
•its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described
above are measured at FVTPL. In addition, on initial recognition the Group may
irrevocably designate a financial asset that otherwise meets the requirements to be
measured at amortised cost or at FVOCI as measured at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch that would otherwise arise.
Nevertheless, on initial recognition of an equity investment that is not held for trading,
the Group may irrevocably elect to present subsequent changes in fair value in OCI.
IFRS 9 largely retains the requirements in IAS 39 for the classification and
measurement of financial liabilities. However, under IAS 39 all fair value changes of
financial liabilities designated as at FVTPL are recognised in profit or loss, whereas
under IFRS 9 these fair value changes will generally be presented as follows.
•The amount of the change in the fair value that is attributable to changes in the
credit risk of the liability will be presented in OCI.
•The remaining amount of the change in the fair value will be presented in profit or
loss.
ii. Business model assessment
The Group determines its business model at the level that best reflects how it manages
groups of financial assets to achieve its business objective.
The Group deems its current investment holdings to be held within a business model
whose objective is achieved by both collecting contractual cash flows and selling
financial assets. On the other hand the Company holds financial assets to generate
returns and provide a capital base to provide for settlement of claims as they arise.
iii. Financial assets – Impairment
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected
credit loss’ model. This will require considerable judgement about how changes in
economic factors affect ECL, which will be determined on a probability-weighted basis.
The new impairment model will apply to the Group’s financial assets measured at
amortised cost, debt investments at FVOCI and lease and other receivables.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
59
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards effective before
2022 for which the Group elected for the temporary exemption - continued
a. IFRS 9 Financial Instruments - continued
iii. Financial assets - Impairment - continued
IFRS 9 requires a loss allowance to be recognised at an amount equal to either 12-
month ECL or lifetime ECL. Lifetime ECL are the ECL that result from all possible
default events over the expected life of the financial instrument; 12-month ECL are the
portion of lifetime ECL that result from default events on a financial instrument that are
possible within the 12 months after the reporting date.
The Group is still assessing the most relevant impairment methods available for its
financial assets.
When determining whether the credit risk on a financial instrument has increased
significantly since initial recognition, the Group will consider reasonable and
supportable information that is relevant and available without undue cost or effort. This
will include both qualitative and quantitative information and analysis based on the
Group’s experience, expert credit assessment and forward-looking information. As a
backstop, the Group will consider that a significant increase in credit risk occurs no
later than when an asset is more than 90 days past due.
iv. Measurement of Expected Credit Losses (ECL)
ECL are a probability-weighted estimate of credit losses. Credit losses are measured as
the present value of all cash shortfalls (i.e. the difference between the cash flows due to
the Group in accordance with the contract and the cash flows that the Group expects to
receive).
For each exposure subject to impairment, an expected credit loss shall be calculated for
this purpose.
v. Transition
The general principle in IFRS 9 is for retrospective application in accordance with IAS
8 Accounting Policies, Changes in Accounting Estimates and Errors. The transition
requirements refer to the date of initial application (DIA), which is the beginning of the
reporting period in which an insurer first applies IFRS 9. IFRS 9 contains certain
exemptions from full retrospective application. These include an exemption from the
requirement to restate comparative information about classification and measurement,
including impairment. If an insurer does not restate prior periods, then opening retained
earnings (or other components of equity, as appropriate) for the annual reporting period
that includes the DIA is adjusted for any difference between the carrying amounts of
financial instruments before adoption of IFRS 9 and the new carrying amounts.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
60
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards effective before
2022 for which the Group elected for the temporary exemption - continued
a. IFRS 9 Financial Instruments - continued
v. Transition - continued
The Group is considering the implications of the standard on transition and its impact
on the financial results and position. The Group is not illustrating quantitative figures as
assessments are ongoing thereby resulting in limited use of such information.
Standards, interpretations and amendments to published standards that are not yet
effective
A number of new standards are effective for annual periods beginning after 1 January
2023 and earlier application is permitted. However, the Group has not early adopted the
new standards in preparing these consolidated financial statements.
The Group will apply IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments
for the first time on 1 January 2023. These standards will bring significant changes to
the accounting for insurance and reinsurance contracts and financial instruments and
are expected to have a material impact on the Group’s consolidated financial statements
in the period of initial application.
IFRS 17, published on 18 May 2017, and amended on 25 June 2020, supersedes IFRS 4
Insurance Contracts and is applicable for annual periods beginning on or after 1 January
2023, with early adoption permitted. IFRS 17 was adopted by the European Union
(‘EU’) on 19 November 2021, with an exemption regarding the annual cohort
requirement. The current standard on insurance contracts, IFRS 4, has been amended
accordingly, extending to 2023 the temporary exemption for qualifying insurers to
apply IFRS 9. The Group has not early adopted IFRS 17.
a. Estimated impact of the adoption of IFRS 17 and IFRS 9
The Group is not in a position to disclose known or reasonably estimable information
relevant to assessing the possible financial impact that the application of IFRS 17 and
IFRS 9 will have on its financial statements in the period of initial application when the
2022 financial statements were authorised for issue.
b. IFRS 17 Insurance Contracts
The nature of the changes in accounting policies, to the extent that the Group has
assessed so far, are summarised below.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
61
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
i. Identifying contracts in the scope of IFRS 17
IFRS 17 establishes principles for the recognition, measurement, presentation and
disclosure of insurance contracts, reinsurance contracts and to investment contracts
with discretionary participation features (‘DPF’).
When identifying contracts in the scope of IFRS 17, the Group will have to assess
whether a set or series of contracts needs to be treated as a single contract and whether
goods and services components, embedded derivatives and investment components
within particular contracts must be separated and accounted for under another standard.
The Group is assessing the impact of the scope changes arising from the application of
these requirements as compared to IFRS 4.
ii. Level of aggregation
Under IFRS 17, insurance contracts and investment contracts with DPF are aggregated
into groups for measurement purposes. Groups of contracts are determined by first
identifying portfolios of contracts, each comprising contracts subject to similar risks
and managed together. Contracts in different product lines or issued by different Group
entities are expected to be in different portfolios. Each portfolio is then divided into
annual cohorts (i.e., by year of inception) and each annual cohort into three groups:
•any contracts that are onerous on initial recognition.
•any contracts that, on initial recognition, have no significant possibility of becoming
onerous subsequently; and
•any remaining contracts in the annual cohort.
The Group is assessing the possibility to align annual cohorts with its financial year
(i.e. calendar year), and is presently in the process of formulating the methodology for
allocating contracts to profitability groups.
IFRS 17 as adopted by the EU provides an optional exemption from applying this
annual cohort requirement to a) groups of insurance contracts with direct participation
features and groups of investment contracts with DPF with cash flows that affect or are
affected by cash flows to policyholders; as well as b) groups of insurance contracts that
are managed across generations of contracts and meet specific conditions for the
application of the matching adjustment. This exemption will be reviewed by the EU by
the end of 2027, taking into account the outcome of the IASB’s post-implementation
review of IFRS 17. The Group intends to apply the exemption from annual cohorts to
its with-profits portfolio.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
62
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continue
ii. Level of aggregation - continued
Contracts within a portfolio that would fall into different groups only because law or
regulation specifically constrains the Group’s practical ability to set a different price or
level of benefits for policyholders with different characteristics are included in the same
group. The Group will consider this for contracts issued by the Group that are required
by EU regulation to be priced on a gender-neutral basis.When a contract is recognised,
it is added to an existing group of contracts or, if the contract does not qualify for
inclusion in an existing group, it forms a new group to which future contracts may be
added. Groups of reinsurance contracts will also need to be established and the Group
intends to establish these such that each group comprises a single reinsurance contract.
The level of aggregation requirements of IFRS 17 limit the offsetting of gains on
groups of profitable contracts, which for general business insurance contracts are
generally released over the duration of the contract, against losses on groups of onerous
contracts, which are recognised immediately. Additionally, for life contracts these are
generally deferred over time via a Contractual Service Margin (‘CSM’) under the
General Measurement Model (‘GMM’) or Variable Fee Approach (‘VFA’), against
losses on groups of onerous contracts, which are recognised immediately.
iii. Contract boundaries
Under IFRS 17, the measurement of a group of contracts includes all of the future cash
flows within the boundary of each contract in the group. Compared with the current
accounting, the Group does not expect the IFRS 17 contract boundary requirements to
significantly change the scope of cash flows to be included in the measurement of
existing and future recognised contracts. The period covered by the premiums within
the contract boundary is the ‘coverage period’, which is relevant when applying a
number of requirements in IFRS 17.
Insurance contracts
For insurance contracts cash flows are within the contract boundary if they arise from
substantive rights and obligations that exist during the reporting period in which the
group can compel the policyholder to pay premiums or has a substantive obligation to
provide services (including insurance coverage). A substantive obligation to provide
services ends when:
•the Group has the practical ability to reassess the risks of the particular
policyholder and can set a price or level of benefits that fully reflects those
reassessed risks; or
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
63
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
iii. Contract boundaries - continued
Insurance contracts - continued
•the Group has the practical ability to reassess the risks of the portfolio that
contains the contract and can set a price or level of benefits that fully reflects the
risks of that portfolio, and the pricing of the premiums up to the reassessment date
does not take into account risks that relate to periods after the reassessment date.
Investment contracts with DPF
For investment contracts with DPF, the cash flows are within the contract boundary if
they result from a substantive obligation of the Group to deliver cash at a present or
future date. The Group has no substantive obligation to deliver cash if it has the
practical ability to set a price for the promise to deliver the cash that fully reflects the
amount of cash promised and related risks.
Reinsurance contracts
For reinsurance contracts, cash flows are within the contract boundary if they arise from
substantive rights and obligations that exist during the reporting period in which the
Group is compelled to pay amounts to the reinsurer or has a substantive right to receive
services from the reinsurer. A substantive right to receive services from the reinsurer
ends when the reinsurer:
•has the practical ability to reassess the risks transferred to it and can set a price or
level of benefits that fully reflects those reassessed risks; or
•has a substantive right to terminate the coverage.
Reinsurance contracts - Non-Life Insurance contracts
Under IFRS 17, cash flows arising from underlying contracts expected to be issued and
ceded after the measurement date, in addition to those arising from underlying contracts
already ceded, may be within the boundaries of the reinsurance contracts and may have
to be considered and estimated in their measurement.
Reinsurance contracts - Life Insurance contracts
Reinsurance contracts cover protection contracts underwritten within the annual term of
the reinsurance contract on a risk-attaching basis. Given the contract boundary of the
underlying term contracts is equal to the lifetime of the policy, the contract boundary of
the reinsurance contract will end once the underlying protection contracts end.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
64
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
iv. Measurement Overview
IFRS 17 introduces a measurement model based on the estimates of the present value of
future cash flows that are expected to arise as the Group fulfills the contracts, an
explicit risk adjustment for non-financial risk and a Contractual Service Margin (CSM).
Within IFRS 17 there are three possible measurement models: the General
Measurement Model (GMM), the Premium Allocation Approach (PAA) and the
Variable Fee Approach (VFA). The GMM is the “default” measurement model for
insurance contracts. For contracts with a coverage period shorter or equal to one year,
there is the option to choose PAA as a simplified measurement model. For contracts
with direct participation features it is mandatory to use VFA. For contracts that do not
classify as direct participation, it is not allowed to use VFA.
v. Measurement – Non-Life Contracts
The Company is currently assessing whether its contracts are PAA eligible, and it is
expected that it will apply the PAA to most insurance and reinsurance contracts held
because the following criteria are expected to be met at inception:
•Insurance contracts and loss-occurring reinsurance contracts: The coverage period
of each contract in the group is one year or less.
•Risk-attaching reinsurance contracts: The Company is currently testing if the
resulting measurement of the asset for remaining coverage would differ materially
from the result of applying the accounting policies described above.
The measurement principles of the PAA differ from the ‘earned premium approach’
used by the Company under current IFRS 4 in the following key areas:
•The liability for remaining coverage reflects premiums received less deferred
insurance acquisition cash flows and less amounts recognised in revenue for
insurance services provided. The word ‘received’ is interpreted literally, rather than
interpreted to mean amounts due. Under IFRS 4, the unearned premium provision
would have often been set up based on premiums receivable, with a separate asset
recorded for the premium receivable in the balance sheet.
•Measurement of the liability for remaining coverage includes an adjustment for the
time value of money and the effect of financial risk where the premium due date
and the related period of services are more than 12 months apart.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
65
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
v. Measurement – Non-Life Contracts - continued
•Measurement of the liability for remaining coverage involves an explicit evaluation
of risk adjustment for non-financial risk when a group of contracts is onerous in
order to calculate a loss component (previously these may have formed part of the
unexpired risk reserve provision)
•Measurement of the liability for incurred claims (previously claims outstanding and
incurred-but-not- reported (IBNR) claims) is determined on a discounted
probability-weighted expected value basis and includes an explicit risk adjustment
for non-financial risk. The liability includes the Company’s obligation to pay other
incurred insurance expenses.
•In the statement of financial position, deferred acquisition cost (DAC) and
insurance-related receivables will no longer be presented separately, but as part of
the insurance liabilities. This will lead to a reduction in total assets, offset by a
reduction in total liabilities, with only limited impact on equity.
Liability for remaining coverage on initial recognition and subsequent measurement
On initial recognition of each group of Non-life insurance contracts, the carrying
amount of the liability for remaining coverage is measured at the premiums received on
initial recognition less any insurance acquisition cash flows at that date.
Subsequently, the carrying amount of the liability for remaining coverage is increased
by any further premiums received and decreased by the amount recognised as insurance
revenue for services provided. The Company expects that the time between providing
each part of the services and the related premium due date will be no more than a year.
Accordingly, as permitted under IFRS 17, the Company will not adjust the liability for
remaining coverage to reflect the time value of money and the effect of financial risk.
If at any time before and during the coverage period, facts and circumstances indicate
that a group of contracts is onerous, then the Company will recognise a loss in profit or
loss and increase the liability for remaining coverage to the extent that the current
estimates of the fulfillment cash flows that relate to remaining coverage exceed the
carrying amount of the liability for remaining coverage.
The Company will recognise the liability for incurred claims of a group of contracts at
the amount of the fulfillment cash flows relating to incurred claims. The future cash
flows will be discounted (at current rates).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
66
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
v. Measurement – Non-Life Contracts - continued
Significant judgement and estimates
Estimates of future cash flows
In estimating future cash flows, the Company will incorporate, in an unbiased way, all
reasonable and supportable information that is available without undue cost or effort at
the reporting date. This information includes both internal and external historical data
about claims and other experience, updated to reflect current expectations of future
events.
The estimates of future cash flows will reflect the Company’s view of current
conditions at the reporting date, as long as the estimates of any relevant market
variables are consistent with observable market prices.
Cash flows within the boundary of a contract are those that relate directly to the
fulfilment of the contract, including those for which the Company has discretion over
the amount or timing. These include payments to (or on behalf of) policyholders,
insurance acquisition cash flows and other costs that are incurred in fulfilling contracts.
Insurance acquisition cash flows and other costs that are incurred in fulfilling contracts
comprise both direct costs and an allocation of fixed and variable overheads.
Discount rates
Due to the low duration of non-life portfolios held by the Company, the Euro risk-free
rate (RFR) as published monthly by EIOPA are likely to be applied without considering
any type of additional differential.
Risk adjustment for non-financial risk
Risk adjustments for non-financial risk will be determined to reflect the compensation
that the Company would require for bearing non-financial risk and its degree of risk
aversion. They will be allocated to groups of contracts based on an analysis of the
respective risk profiles. Applying a confidence level technique, the Company will
estimate the probability distribution of the expected present value of the future cash
flows from the contracts at each reporting date and calculate the risk adjustment for
non-financial risk as the excess of the value at risk at the target confidence level over
the expected present value of the future cash flows allowing for the associated risks
over all future years.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
67
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
vi. Measurement – Life Contracts
IFRS 17 introduces a default measurement model, known as the GMM. The GMM is
based on the estimate of future cash flows that are expected to arise as the Group fulfills
the in scope contracts, including an explicit risk adjustment for non-financial risk, and
the resultant CSM. In arriving at its future cash flows, the Group will need to estimate
the expected value (i.e. the probability-weighted mean) of the full range of possible
outcomes. The CSM of a group of contracts represents the unearned profit that the
Group will recognise as it provides services under those contracts. The CSM for issued
contracts cannot be negative (at inception or subsequently), with any negative amount
(known as an onerous ‘loss component’) recorded in profit or loss immediately. The
Group is looking into the relevant measurement models for its protection and
reinsurance contracts held.
Contracts with direct participating features are subject to certain different requirements.
These contracts are substantially investment-related service contracts under which the
Group promises an investment return based on underlying items. They are contracts for
which, at inception:
•the contractual terms specify that the policyholder participates in a share of a clearly
identified pool of underlying items;
•the Group expects to pay to the policyholder an amount equal to a substantial share
of the fair value returns on the underlying items; and
•the Group expects a substantial proportion of any change in the amounts to be paid
to the policyholder to vary with the change in fair value of the underlying items.
The Group issues with profits and unit linked contracts that meet the above criteria and
is looking into the possibility of measuring these contracts using the VFA.
The Premium Allocation Approach (‘PAA’) is an optional simplified measurement
model in IFRS 17 that is available for insurance and reinsurance contracts that meet the
eligibility criteria (i.e., if the measurement of the liability for remaining coverage
provides a measurement that is not materially different from the GMM) or if the
coverage period is one year or less.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
68
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
vi. Measurement – Life Contracts - continued
i) Estimate of future cash flows
In estimating future cash flows, the Group will incorporate, in an unbiased way, all
reasonable and supportable information that is available without undue cost or effort at
the reporting date. This information includes both internal and external historical data
about claims and other experience, updated to reflect current expectations of future
events.
The estimates of future cash flows will reflect the Group’s view of current conditions at
the reporting date, as long as the estimates of any relevant market variables are
consistent with observable market prices.
When estimating future cash flows, the Group will take into account current
expectations of future events that might affect those cash flows. However, expectations
of future changes in legislation that would change or discharge a present obligation or
create new obligations under existing contracts will not be taken into account until the
change in legislation is substantively enacted.
Cash flows within the boundary of a contract are those that relate directly to the
fulfillment of the contract, including those for which the Group has discretion over the
amount or timing. These include payments to (or on behalf of) policyholders, insurance
acquisition cash flows and other costs that are incurred in fulfilling contracts. Insurance
acquisition cash flows and other costs that are incurred in fulfilling contracts comprise
both direct costs and an allocation of fixed and variable overheads.
Cash flows will be attributed to acquisition activities, other fulfillment activities and
other activities at local entity level using allocation techniques depending on the nature
of the expense. Cash flows attributable to acquisition and other fulfillment activities
will be allocated to groups of contracts using methods that are systematic and rational
and will be consistently applied to all costs that have similar characteristics.
Management is performing an analysis on all the expenses to determine which expenses
are to be considered directly attributable and thus would impact the CSM, and those not
directly attributable which are to be expensed directly to P&L.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
69
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
vi. Measurement – Life Contracts - continued
ii) Discount rates
The requirement to measure liabilities for insurance contracts and investment contracts
with DPF using current discount rates will differ slightly from the Group’s current
practice. The Group will be using the EIOPA risk free rates as the base of the Risk Free
Rate curve. The Group is considering the use of the illiquidity premium to discount the
illiquid liabilities, as applicable.
iii) Risk adjustment for non-financial risk
The risk adjustments for non-financial risk reflects the compensation that the Group
would require for bearing non-financial risk and will align to its risk appetite. The
Group is considering to use value at risk (‘VaR’) methodology to derive the risk
adjustment for its business. In the future, the financial statements will disclose the
entity’s confidence level.
iv) CSM
The CSM is a component of the carrying amount of the asset or liability for a group of
insurance contracts representing the unearned profit that the entity will recognise as it
provides insurance contract services under the insurance contracts in the group. The
Group will recognise the CSM for a group of insurance contracts in its profit or loss, to
reflect insurance contract services transferred to policyholders during the period based
on coverage units.
vii. Presentation and disclosure
IFRS 17 will significantly change how insurance contracts, reinsurance contracts and
investment contracts with DPF are presented and disclosed in the Group’s consolidated
financial statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
70
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
vii. Presentation and disclosure - continued
Under IFRS 17, portfolios of insurance contracts and investment contracts with DPF
that are assets and those that are liabilities, and portfolios of reinsurance contracts that
are assets and those that are liabilities, are presented separately in the statement of
financial position. All rights and obligations arising from a portfolio of contracts will be
presented on a net basis for the Company and on an aggregate basis for the Group;
therefore, balances such as insurance receivables and payables will no longer be
presented separately. Any assets or liabilities recognised for cash flows arising before
the recognition of the related group of contracts (including any assets for insurance
acquisition cash flows) will also be presented in the same line item as the related
portfolios of contracts.
Under IFRS 17, amounts recognised in the statements of profit or loss and statements of
comprehensive income are disaggregated into:
(a) an insurance service result, comprising insurance revenue and insurance service
expenses; and
(b) insurance finance income or expenses.
Amounts from reinsurance contracts will be presented separately.
There will also be additional notes to the financial statements, including detailed
reconciliations. The separate presentation of underwriting and financial results under
IFRS 17 will provide added transparency about the sources of profits and quality of
earnings backed up by additional notes and reconciliations.
Disclosure
IFRS 17 requires extensive new disclosures about amounts recognised in the financial
statements, including detailed reconciliations of contracts, effects of newly recognised
contracts and information on the expected CSM emergence pattern, as well as
disclosures about significant judgements made when applying IFRS 17. There will also
be expanded disclosures about the nature and extent of risks from insurance contracts,
reinsurance contracts and investment contracts with DPF. Disclosures will generally be
made at a more granular level than under IFRS 4, providing more transparent
information for assessing the effects of contracts on the financial statements.
MAPFRE MIDDLESEA p.l.c.
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71
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
viii. Transition
IFRS 17 must be applied retrospectively and consequently the Group will need to
restate the opening Statement of financial position (i.e. at 1 January 2022) as well as the
Statement of profit or loss for 2022 and Statement of financial position as at 31
December 2022. The standard must be applied using a fully retrospective approach
(‘FRA’), unless impracticable, in which case two options are possible:
•the modified retrospective approach (‘MRA’): this approach is based on
maximising the Group’s use of reasonable and supportable information available
without undue cost and effort to the entity, with certain modifications permitted to
the extent that FRA is not possible. The MRA has the objective to achieve the
closest outcome to the FRA as possible; or
•the fair value approach (‘FVA’): the CSM is determined as the positive difference
between the fair value determined in accordance with IFRS 13 ‘Fair Value
Measurement' and the fulfillment cash flows at the transition date.
Life Contracts
At the transition date (i.e. 1 January 2022), the Group will:
•identify, recognise and measure each group of insurance contracts, reinsurance
contracts and investment contracts with DPF as if IFRS 17 had always been applied;
•identify, recognise and measure any assets for insurance acquisition cash flows as if
IFRS 17 had always been applied, except that they will not be tested for
recoverability before 1 January 2022;
•derecognise previously reported balance that would not have existed if IFRS 17 had
always been applied; and
•recognise in equity, on a net basis, any differences between amounts recognised
under IFRS 4 and other applicable standards and IFRS 17.
Given the long term nature of life contracts, it is not practicable for the fully
retrospective approach to be adopted for all cohorts.Similarly, investment contracts with
DPF are generally long-term in nature and it may not be practicable to apply the fully
retrospective approach for all cohorts. Management is currently exploring the other
transition options.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
72
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
b. IFRS 17 Insurance Contracts - continued
viii. Transition - continued
Life Contracts - continued
As explained above, IFRS 17 differs from IFRS 4 in a number of ways. The Group
expects that two of the largest differences will pertain to the value of in-force business
and the measurement of its in-scope contracts in accordance with the requirements of
IFRS 17. The value of in-force business will be derecognised upon transition to IFRS
17 leading to a reduction in equity (undistributable reserves). On the other hand, the
impact of the measurement of in-scope contracts in accordance with IFRS 17 is still to
be determined.
Non-Life Contracts
Changes in accounting policies resulting from the adoption of IFRS 17 are likely to be
applied using a full retrospective approach to the extent practicable.
This implies that:
•Each group of contracts must be identified, recognized, and measured as if IFRS 17
had always applied.
•Balances that would not exist had IFRS 17 always applied shall be derecognised
from the financial statements, and
•Any net difference shall be recorded in equity.
c. IFRS 17 and IFRS 9 implementation program
In conjunction to the qualitative impacts described above, the Group is currently
assessing the quantitative impact of the application of IFRS 17 and IFRS 9. The final
figures will also depend on the application of key systems being provided by third party
service providers and guidance by MAPFRE SA.
Although IFRS 17 and IFRS 9 implementation projects have made significant progress,
as of the date of the publication of these financial statements, it is not practicable to
reliably quantify the effects on the financial statement mainly because;
•The assessments made by the Group on key IFRS 17 and IFRS 9 topics are not
finalised and therefore may be subject to adjustment.
•Implementing the new standard will require the Group to revise certain accounting
processes and internal controls and these changes are not yet complete.
MAPFRE MIDDLESEA p.l.c.
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73
1.Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet
effective - continued
c. IFRS 17 and IFRS 9 implementation program - continued
Transformation risk is a material risk for the group, with a number of significant change
programmes under way which if not delivered to defined timelines, scope and cost may
negatively impact its operational capability, control environment, reputation, and ability
to deliver its strategy and maintain market competitiveness.
The Group’s current portfolio of transformation and significant change programmes
include the continued implementation of a core transactional system; the expansion of
the Group’s digital capabilities and use of technology, platforms and analytics; and
improvement of operational processes leading to business efficiencies.
The Group therefore aims to ensure that, for both transformation and strategic
initiatives, strong programme governance is in place with adequate support from third
party service providers to ensure that the set targets for implementation are met both in
terms of timelines and budgeted costs.
MAPFRE MIDDLESEA p.l.c.
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74
2.Accounting policies
The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied to all the
years presented, unless otherwise stated.
2.1 Consolidation
(a)Subsidiary undertakings
The consolidated financial statements incorporate the assets, liabilities and results of
the Company and its subsidiary (or group) undertakings drawn up to 31 December each
year. Subsidiary undertakings are those companies over which the Group has control,
either by way of majority shareholding, through contractual agreements with the other
vote holders of the investee or rights arising from other contractual agreements, giving
it the power to govern the financial and operating policies of the investee. Specifically,
the Group controls an investee if and only if the Group has:
•Power over the investee (i.e. existing rights that give it the current ability to direct
the relevant activities of the investee);
•Exposure, or rights, to variable returns from its involvement with the investee; and
•The ability to use its power over the investee to affect its returns.
The Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are
included in the statement of financial position and the statement of comprehensive
income from the date the Group gains control until the date the Group ceases to control
the subsidiary.
The Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair value of the assets
transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the Group. The consideration tr ansferred includes the fair value of
any asset or liability resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. The Group
recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest’s proportionate share of the
recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the
acquirer’s previously held equity interest in the acquiree is re-measured to fair value at
the acquisition date through profit or loss.
MAPFRE MIDDLESEA p.l.c.
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75
2.Accounting policies - continued
2.1 Consolidation - continued
(a)Subsidiary undertakings - continued
Goodwill is initially measured as the excess of the aggregate of the consideration
transferred and the fair value of non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the
net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Profit or loss and each component of other comprehensive income are attributed to the
equity holders of the parent of the Group and to the non-controlling interests, even if
this results in the non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with the Group’s accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation. A list of the Group’s
subsidiaries is set out in Note 20.
(b)Associated undertakings
An associate is an entity over which the Group has significant influence. Significant
influence is the power to participate in the financial and operating policy decisions of
the investee, but is not control or joint control over those policies. The considerations
made in determining significant influence are similar to those necessary to determine
control over subsidiaries. Except for investment-linked insurance funds, interests in
associated undertakings are accounted for by the equity method of accounting and are
initially recognised at cost and the carrying amount is increased or decreased to
recognise the investor’s share of profit or loss of the investee after the date of
acquisition.
The Group’s investment in associates includes goodwill (net of any accumulated
impairment loss) identified on acquisition. Equity accounting involves recognising in
the profit or loss the share of the associated undertaking’s post-acquisition profits or
losses. The interest in the associated undertaking is carried in the statements of
financial position at an amount that reflects the share of the net assets of the associated
undertaking. When the Group’s share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf
of the associate.
Intra-group gains on transactions between the Group and its associates are eliminated to
the extent of the Group’s interest in the associates. Intra-group losses are also
eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies for associated undertakings are changed where
necessary to ensure consistency with the policies adopted by the Group. A list of the
Group’s associated undertakings is set out in Note 21.
MAPFRE MIDDLESEA p.l.c.
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76
2. Accounting policies - continued
2.1 Consolidation - continued
(b)Associated undertakings - continued
Interests in associated undertakings that are allocated to the insurance fund are
designated as financial assets at fair value through profit or loss. They are accounted
for in accordance with the recognition and measurement principles described in Note
2.9.
2.2 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating decision-maker,
responsible for allocating resources and assessing performance of the operating
segments, has been identified as the executive management which implements the
strategic decisions taken by the Board. In identifying the Group’s business segments,
the chief operating decision-maker is also guided by the Regulations under the
Insurance Business Act, 1998 (“Insurance Regulations”) on the disclosure requirements
relevant to specified insurance classes of business.
2.3 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates
(the ‘functional currency’). The euro is the Group’s and Company’s functional and
presentation currency.
Transactions and balances
Transactions in foreign currencies have been converted into the functional currency at
the rates of exchange ruling on the date of the transaction or valuation where items are
re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the profit or loss account.
All foreign exchange gains and losses that relate to net claims incurred are presented in
the technical profit or loss account within ‘claims incurred’. All other foreign exchange
gains and losses are presented in the profit or loss account within ‘investment income’
or ‘investment expense’.
Translation differences on non-monetary items held at fair value through profit or loss,
are reported as part of the fair value gain or loss in the profit or loss. Translation
differences on non-monetary financial assets, such as equities classified as other
available-for-sale financial assets, are included in the fair value reserve in other
comprehensive income.
MAPFRE MIDDLESEA p.l.c.
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77
2.Accounting policies - continued
2.4 Intangible assets
Value of in-force business
The value of in-force business is determined by the directors after considering the
advice of the Group’s Approved Actuary. The valuation represents the discounted value
of projected future transfers to shareholders from contracts in force at the year end, after
making a provision for taxation. In determining this valuation, assumptions relating to
future mortality, persistence and levels of expenses are based on experience of the type
of business concerned.
Gross investment returns and asset allocations assumed vary depending upon the mix of
investments held by the Group and expected market conditions. Annual movements in
the value of the in-force business are credited or debited to other comprehensive
income. Note 16 contains further information in relation to this asset.
Computer software
Acquired computer software licences are measured at cost less any accumulated
amortization and any accumulated impairment losses. Acquired computer software
licenses are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised using the straight-line method over their
useful lives, not exceeding a period of ten years. All costs associated with maintaining
computer software programmes are recognised as an expense as incurred.
Deferred policy acquisition costs – long term contracts
Incremental costs that are incurred in acquiring new investment contracts without DPF
are capitalised as deferred acquisition costs (‘DAC’). The DAC is subsequently
amortised over the life of the contracts as follows:
- For long term investment contracts with a fixed maturity date, DAC is amortised
over the life of the contract.
- For long term investment contracts with no fixed date of maturity, DAC is amortised
over the estimated useful life of the contract. This basis is reviewed periodically with
reference to the historical experience of surrenders for these contracts.
MAPFRE MIDDLESEA p.l.c.
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78
2.Accounting policies - continued
2.5 Property, plant and equipmen t
All property, plant and equipment is initially recorded at historical cost. Freehold land
and buildings are subsequently shown at fair value based on periodic valuations by
external independent valuers, less subsequent depreciation for buildings. Valuations are
carried out on a regular basis such that the carrying amount of property does not differ
materially from that which would be determined using fair values at the end of the
reporting period. Any accumulated depreciation at the date of revaluation is eliminated
against the gross carrying amount of the asset, and the net amount is restated to the re-
valued amount of the asset. All other property, plant and equipment is stated at
historical cost less depreciation and impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised. All other repairs and
maintenance costs are charged to the profit or loss account during the financial period
in which they are incurred.
Increases in the carrying amount arising on revaluation of land and buildings are
credited to other comprehensive income as other reserves in shareholders’ equity.
Decreases that offset previous increases of the same asset are charged against other
comprehensive income as other reserves directly in equity; all other decreases are
charged to the profit or loss account. Each year the difference between depreciation
based on the revalued carrying amount of the asset charged to the profit or loss account
and depreciation based on the asset’s original cost is transferred from ‘other reserves’ to
‘retained earnings’.
Freehold land is not depreciated as it is deemed to have an indefinite life. Depreciation
on other assets is calculated using the straight-line method to allocate their cost or
revalued amounts to their residual values over their estimated useful lives as follows:

| Buildings | 100 years
| Leasehold improvements | 10 - 40 years
| Motor vehicles | 5 years
| Furniture, fittings and equipment | 3 - 10 years

The assets’ residual values and useful lives are reviewed at the end of each reporting
period and adjusted if appropriate.
An asset’s carrying amount is written down immediately to its recoverable amount if
the asset’s carrying amount is greater than its estimated recoverable amount (accounting
policy 2.10).
MAPFRE MIDDLESEA p.l.c.
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79
2.Accounting policies - continued
2.5 Property, plant and equipment - continued
Gains and losses on disposals are determined by comparing proceeds with carrying
amounts and are included in the profit or loss account. When revalued assets are sold,
the amounts included in other reserves relating to the assets are transferred to retained
earnings.
2.6 Investment property
Freehold and leasehold properties treated as investment property principally comprise
office and other commercial buildings that are held for long term rental yields and that
are not occupied by the Group or Company respectively. Investment property is initially
measured at cost and subsequently carried at fair value. Fair value is based on active
market prices, adjusted, if necessary for any difference in the nature, location or
condition of the specific asset. If this information is not available, the Group uses
alternative valuation methods such as discounted cash flow projections or recent prices
in less active markets. These valuations are prepared annually by a qualified valuation
expert. Investment property that is being redeveloped for continuing use as investment
property, or for which the market has become less active, continues to be measured at
fair value. Changes in fair values are reported in the profit or loss account.
If an investment property becomes owner-occupied, it is reclassified as property, plant
and equipment, and its fair value at the date of reclassification becomes its cost for
subsequent accounting purposes.
2.7 Investments in subsidiary undertakings
In the Company’s financial statements, investments in subsidiary undertakings are
accounted for by the cost method of accounting less impairment.
Provisions are recorded where, in the opinion of the directors, at the end of a reporting
period, there is an impairment in value. Where there has been an impairment in the
value of an investment, it is recognised as an expense in the period in which the
impairment is identified or has occurred. If in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment
loss is reversed by adjusting the allowance account. The amount of the reversal is
recognised in the profit or loss account.
The dividend income from such investments is included in the profit or loss account in
the accounting year in which the Company’s rights to receive payment of any dividend
is established.
On disposal of an investment, the difference between the net disposal proceeds and the
carrying amount is charged or credited to the profit or loss account and included within
investment expense or income.
MAPFRE MIDDLESEA p.l.c.
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80
2.Accounting policies - continued
2.8 Investments in associated undertakings
In the Company’s financial statements, investments in associated undertakings are
accounted using the equity method. They are initially recognised at cost which includes
transaction costs. Subsequent to initial recognition the carrying amount is increased or
decreased to recognise the investor’s share of profit or loss. Distributions received from
an investee reduce the carrying amount of the investment. The changes in the investee’s
proportionate interest arising from changes in the investee’s other comprehensive
income, such as those arising from revaluation of property, plant and equipment and
from exchange translation differences are recognised in the other comprehensive
income.
2.9 Financial assets
The Group classifies its financial assets (other than its investment in subsidiaries) into
the following categories: financial assets at fair value through profit or loss, other
available-for-sale investments and loans and receivables. The directors determine the
appropriate classification of financial assets at the time of purchase and re-evaluate such
designation at every reporting date.
Classification
▪Financial assets at fair value through profit or loss are part of a group of
investments that is managed on a portfolio basis and whose performance is
evaluated and reported internally on a fair value basis to the Board and relevant
key management personnel in accordance with a documented investment strategy.
Assets that are part of these portfolios are designated upon initial recognition at fair
value through profit or loss. Financial assets that are held to match insurance and
investment contracts liabilities are also designated at inception as fair value
through profit or loss to eliminate or significantly reduce the accounting mismatch
that would otherwise arise from measuring insurance assets or liabilities, or
recognising the gains and losses on them on different basis. Derivatives are also
classified at fair value through profit or loss.
▪Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market, other than those
that the Group has designated at fair value through profit or loss. They include,
inter alia, reinsurers’ share of technical provisions, insurance and other
receivables, cash and cash equivalents in the statements of financial positions as
well as other financial investments (comprising deposits with credit institutions,
and loans) classified as loans and receivables within Note 22.
MAPFRE MIDDLESEA p.l.c.
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81
2. Accounting policies - continued
2.9 Financial assets - continued
Classification - continued
•Available-for-sale investments are those non-derivative financial assets that are
designated as available-for-sale or are not classified as (a) loans and receivables,
(b) held-to-maturity or (c) financial assets at fair value through profit or loss.
Recognition and measurement
All purchases and sales of investments are recognised on the trade date, which is the
date that the Group commits to purchase or sell the assets. All investments are initially
recognised at fair value plus, in the case of all financial assets not carried at fair value
through profit or loss, transaction costs that are directly attributable to their acquisition.
Financial assets are de-recognised when the rights to receive cash flows from them
have expired or where they have been transferred and the Group has also transferred
substantially all risks and rewards of ownership.
Financial assets at fair value through profit or loss and other available-for-sale
investments are subsequently re-measured at fair value. Loans and receivables are
carried at amortised cost using the effective interest method, less any provision for
impairment.
Realised and unrealised gains and losses arising from changes in the value of the
‘financial assets at fair value through profit or loss’ category are presented in the profit
or loss account in the period in which they arise.
Changes in the fair value of monetary and non-monetary securities classified as
available-for-sale are recognised in other comprehensive income. When securities
classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognised in other comprehensive income are included in the profit or loss
account within investment income.
For financial instruments traded in active markets, the determination of fair values of
financial assets and financial liabilities is based on quoted market prices or dealer price
quotations. This includes listed equity securities and quoted debt instruments on major
exchanges. The quoted market price used for financial assets held by the Group is the
current bid price or closing price as appropriate. A financial instrument is regarded as
quoted in an active market if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service or regulatory agency, and
those prices represent actual and regularly occurring market transactions on an arm’s
length basis. If the market for a financial asset is not active, the Group establishes fair
value by using valuation techniques. These include the use of recent arm’s length
transactions, reference to other instruments that are substantially the same or valued by
reference to the net assets of the underlying investment.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.9 Financial assets - continued
Recognition and measurement - continued
Derivatives are recognised at fair value on the date on which a derivative contract is
entered into and are subsequently re-measured at their fair value. Fair values are
obtained from quoted market prices in active markets and other valuation techniques, as
appropriate. Subsequent changes in the fair value of any derivative instruments are
recognised immediately in the profit or loss account. All derivatives are carried as
assets when fair value is positive, and as liabilities when fair value is negative.
The Group enters into currency forward contracts to hedge the foreign exchange risk
arising on its investments denominated in a foreign currency. These transactions
provide effective economic hedges under the Group’s risk management policies.
However, hedge accounting under the specific rules in IAS 39 is not required because
the change in the value of the hedged financial instrument is recognised in the profit or
loss account.
2.10 Impairment of assets
(a)Impairment of financial assets at amortised cost
The Group assesses at the end of each reporting period whether there is objective
evidence that a financial asset or group of financial assets is impaired. A financial asset
or group of financial assets is impaired and impairment losses are incurred only if there
is objective evidence of impairment as a result of one or more events that have occurred
after the initial recognition of the asset (“a loss event”) and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
Objective evidence that a financial asset or group of assets is impaired includes
observable data that comes to the attention of the Group about the following events:
i.significant financial difficulty of the issuer or debtor;
ii.a breach of contract, such as a default or delinquency in payments;
iii.it becoming probable that the issuer or debtor will enter bankruptcy or other
financial reorganisation;
iv.the disappearance of an active market for that financial asset because of
financial difficulties; or
v.observable data indicating that there is a measurable decrease in the estimated
future cash flow 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.
MAPFRE MIDDLESEA p.l.c.
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2. Accounting policies - continued
2.10 Impairment of assets - continued
(a)Impairment of financial assets at amortised cost - continued
The Group first assesses whether objective evidence of impairment exists individually
for financial assets that are individually significant. If the Group determines that no
objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with
similar credit risk characteristics and collectively assesses them for impairment. Assets
that are individually assessed for impairment and for which an impairment loss is or
continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred on loans and
receivables carried at amortised cost, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated
future cash flows discounted at the financial asset’s original effective interest rate. The
carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognised in the profit or loss account.
If in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised
(such as improved credit rating), the previously recognised impairment loss is reversed
by adjusting the allowance account. The amount of the reversal is recognised in the
profit or loss account.
(b)Assets classified as investments in associated undertakings/other available-for-sale
investments
The Group assesses at end of the reporting period whether there is objective evidence
that an available-for-sale financial asset is impaired, including in the case of equity
investments classified as available-for-sale, a significant or prolonged decline in the fair
value of the security below its cost. ‘Significant’ is evaluated against the original cost
of the investment and ‘prolonged’ against the period in which the fair value has been
below its original cost. If any such evidence exists for available-for-sale financial
assets, the cumulative loss – measured as the difference between the acquisition cost
and current fair value, less any impairment loss on the financial asset previously
recognised in the profit or loss – is removed from equity and recognised in the profit or
loss account. Impairment losses recognised in the profit or loss account on equity
instruments are not subsequently reversed through the profit or loss account but through
other comprehensive income as other reserves.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.10 Impairment of assets - continued
(c)Impairment of non-financial assets
Assets that have an indefinite useful life and are not subject to amortisation and/or
assets not yet available for use are tested annually for impairment. Assets that are
subject to amortisation or depreciation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable and
independent cash flows (cash-generating units).
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the
statements of financial position only when there is a current legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
2.12 Cash and cash equivalents
Cash and cash equivalents are carried in the statements of financial position at face
value. In the cash flow statement, cash and cash equivalents include cash in hand and
deposits held at call with banks, which are held for operational purposes.
2.13 Share capital
Shares are classified as equity when there is no obligation to transfer cash or other
assets. Incremental costs directly attributable to the issue of new shares are shown in
equity as a deduction from the proceeds net of tax.
2.14 Insurance and investment contracts
The Group issues contracts that transfer insurance risk or financial risk or both.
(a)Classification
Insurance contracts are those contracts that transfer significant insurance risk. Such
contracts may also transfer financial risk. As a general guideline, the Group defines as
significant insurance risk the probability of having to pay benefits on the occurrence of
an insured event that are at least 10% more than the benefits payable if the insured
event did not occur.
Investment contracts are those contracts that transfer financial risk with no significant
insurance risk.
MAPFRE MIDDLESEA p.l.c.
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85
2.Accounting policies - continued
2.14 Insurance and investment contracts - continued
(a)Classification - continued
A number of insurance and investment contracts contain a discretionary participation
feature (‘DPF’). This feature entitles the holder to receive, as a supplement to
guaranteed benefits, additional benefits or bonuses:
–that are likely to be a significant portion of the total contractual benefits;
–whose amount or timing is contractually at the discretion of the Group; and
–that are based on realised and/or unrealised investment returns on underlying assets
held by the Group.
Local statutory regulations and the terms and conditions of these contracts set out the
basis for the determination of the amounts on which the additional discretionary
benefits are based (the DPF eligible surplus), and within which the Group may exercise
its discretion as to the quantum and timing of their payment to contract holders, also
considering the advice of the Approved Actuary.
(b)Recognition and measurement
Insurance contracts and investment contracts with DPF are classified into five main
categories depending on the duration of risk and whether or not the terms and
conditions are fixed.
(i) Short-term insurance contracts - General business
The results for general business are determined on an annual basis whereby the incurred
cost of claims, commission and related expenses are charged against the earned
proportion of premiums, net of reinsurance as follows:
•Premiums written comprise all amounts due during the financial year in respect of
contracts of insurance entered into regardless of the fact that such amounts may relate
in whole or in part to a later financial year and includes any differences between the
booked premiums for prior years and those previously accrued, less cancellations.
•Unearned premiums represent the proportion of premiums written in the year that
relate to unexpired terms of policies in force at the statement of financial position
date, calculated on a time apportionment basis.
•Commissions and other acquisition costs that vary with, and are related to, securing
new contracts and renewing existing contracts are deferred over the period in which
the related premiums are earned. These are capitalised and shown as deferred
acquisition costs (‘DAC’) in the statement of financial position. DAC is amortised
over the term of the policies as the premium is earned. All other costs are recognised
as expenses when incurred.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.14 Insurance and investment contracts - continued
(b)Recognition and measurement - continued
(i) Short-term insurance contracts - General business - continued
•Claims incurred comprise claims and related expenses paid in the year and changes in
the provisions for outstanding claims and related expenses, together with any other
adjustments to claims from previous years. Where applicable, deductions are made for
salvage and other recoveries.
•Provision is made at the year-end for the estimated cost of claims incurred but not settled
at the statement of financial position date, including the estimated cost of claims incurred
but not yet reported to the Group. The estimated cost of claims includes expenses to be
incurred in settling claims. The Group takes all reasonable steps to ensure that it has
appropriate information regarding its claims exposures. The Group does not discount its
liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of
assessments for individual cases reported to the Group including those that may be
affected by external factors (such as court decisions). Statistical analysis by the in-house
actuary are carried out on certain portfolios to determine ultimate cost of claims reported
and those incurred but not yet reported.
•Provision in the form of an unexpired risk provision, is made on the basis of claims
and administrative expenses likely to arise after the end of the financial year from
contracts concluded before the reporting date, in so far as their estimated value
exceeds the provision for unearned premiums and any premiums receivable under
those contracts.
(ii) Group Life insurance contracts
Group life business (classified as long-term insurance business under the Insurance
Business Act, 1998) consists of annual policies that cover the lives of a group of
customers’ employees for the year under cover. Premiums, including reinsurance
premiums, and claims are accounted for when due for payment. Reinsurance recoveries
are accounted for in the same period as the related claim. The long-term business
provision is based on the net “unearned premiums” method as adjusted to take into
account the premium written. The valuation is carried out in conjunction with the
Company’s appointed actuary. Profits, which accrue as a result of actuarial valuations,
are released to the non-technical profit or loss account. Any shortfall between actuarial
valuations and the balance on the long-term business provision is appropriated from the
non-technical profit or loss account.
(iii)Long term insurance contracts – individual life
These contracts insure events associated with human life (for example death or
survival) over a long and fixed duration. The guaranteed and fixed element for these
contracts relates to the sum assured, i.e. the benefit payable on death or maturity.
MAPFRE MIDDLESEA p.l.c.
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87
2.Accounting policies - continued
2.14 Insurance and investment contracts - continued
(b)Recognition and measurement - continued
(iii)Long term insurance contracts – individual life - continued
Premiums are recognised as revenue when they become payable by the contract holder.
Premiums are shown before deduction of commission and are inclusive of policy fees
receivable. A liability for contractual benefits that are expected to be incurred in the
future is recorded when the premiums are recognised.
Maturity claims are charged to income as incurred when due for payment, at which date
they cease to be included within the calculation of the liability. Surrenders are
accounted for as incurred when paid or, if earlier, on the date when the policy ceases to
be included within the calculation of the liability. Death claims are accounted for when
notified. Claims payable include related claims handling costs.
(iv)Long term insurance contracts with DPF – individual life
For traditional life insurance contracts, the liability is calculated on the basis of a
prudent prospective actuarial method, using assumptions regarding mortality,
maintenance expenses and investment income, and includes a margin for adverse
deviations. Additionally, liabilities under unit-linked life insurance contracts reflect the
value of assets held within unitised investment pools. The liability is recalculated at
each reporting date. It is determined by the Group’s Approved Actuary following his
annual investigation of the financial condition of the Group’s long term business as
required under the Insurance Business Act, 1998. The above method of calculation
satisfies the minimum liability adequacy test required by IFRS 4.
These contracts further combine a DPF that entitles the holder to receive a bonus as
declared by the Group from the DPF eligible surplus.
Premiums are recognised as revenue when they become payable by the contract holder.
Premiums are shown before deduction of commission, and are inclusive of policy fees
receivable.
Maturity claims are charged to profit or loss as incurred when due for payment, at
which date they cease to be included within the calculation of the liability. Surrenders
are accounted for as incurred when paid or, if earlier, on the date when the policy ceases
to be included within the calculation of the liability. Death claims are accounted for
when notified. Claims payable include related claims handling costs.
MAPFRE MIDDLESEA p.l.c.
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88
2.Accounting policies - continued
2.14 Insurance and investment contracts - continued
(b) Recognition and measurement - continued
(iv)Long term insurance contracts with DPF – individual life - continued
Bonuses charged to the long term business technical account in a given year comprise:
(i)new reversionary bonuses declared in respect of that year, which are provided
within the calculation of the respective liability;
(ii)terminal bonuses paid out to policyholders on maturity and included within claims
paid; and
(iii)terminal bonuses declared at the Group’s discretion and included within the
respective liability.
A liability for contractual benefits that are expected to be incurred in the future is
recorded when the premiums are recognised. The liability is determined as the sum of
the expected discounted value of the future cash flows based on bonuses consistent with
the bonus policy and prudent rates of future investment return, expenses and mortality,
and includes margins for adverse deviations. The liability is recalculated at each
reporting date. The liability is determined by the Group’s Approved Actuary following
his annual investigation of the financial condition of the Group’s long term business as
required under the Insurance Business Act, 1998. The above method of calculation
satisfies the liability adequacy test required by IFRS 4.
(v)Investment contracts with DPF
These contracts do not expose the Group to significant insurance risk. They contain a
DPF that entitles the holder to receive a bonus as declared by the Group from the DPF
eligible surplus.
Recognition and measurement principles are the same as for insurance contracts with
DPF as described above. Additionally, liabilities under unit-linked investment contracts
reflect the value of assets held within unitised investment pools.
(c)Reinsurance contracts held
Contracts entered into by the Group with reinsurers under which the Group is
compensated for losses on one or more contracts issued by the Group and that meet the
classification requirements for insurance contracts are classified as reinsurance
contracts held. Insurance contracts entered into by the Group under which the contract
holder is another insurer (inwards reinsurance) are included with insurance contracts.
MAPFRE MIDDLESEA p.l.c.
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89
2.Accounting policies - continued
2.14 Insurance and investment contracts - continued
(c)Reinsurance contracts held - continued
The benefits to which the Group is entitled under its reinsurance contracts held are
recognised as reinsurance assets. These assets consist of short-term balances due from
reinsurers (classified within receivables), unless netted off against amounts payable to
reinsurers, as well as longer term receivables (classified within reinsurers’ share of
technical provisions) that are dependent on the expected claims and benefits arising
under the related reinsured insurance contracts. Amounts recoverable from or due to
reinsurers are measured consistently with the amounts associated with the reinsured
insurance contracts and in accordance with the terms of each reinsurance contract.
Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are
recognised as an expense when due.
The Group assesses its reinsurance assets for impairment on a regular basis. If there is
objective evidence that the reinsurance asset is impaired, the Group reduces the
carrying amount of the reinsurance asset to its recoverable amount and recognises that
impairment loss in the profit or loss account. The Group gathers the objective evidence
that a reinsurance asset is impaired using the same process adopted for financial assets
held at amortised cost. The impairment loss is also calculated following the same
method used for these financial assets. These processes are described in accounting
policy 2.10.
(d)Receivables and payables related to insurance contracts
Receivables and payables are recognised when due. These include amounts due to and
from agents, brokers, tied insurance intermediaries, third party insurers by way of
recoveries on claims and insurance contract holders.
If there is objective evidence that an insurance receivable is impaired, the Group
reduces the carrying amount of the insurance receivable accordingly and recognises
that impairment loss in the profit or loss account. The Group gathers objective evidence
that an insurance receivable is impaired using the same process adopted for financial
assets held at amortised cost.
The impairment loss is calculated following the same method used for these financial
assets. These processes are described in accounting policy 2.10.
(e) Liability adequacy test
The Company reserves for unexpired risks for those lines of general business where the
expected loss ratio exceeds 100% of the earned premium less acquisition cost.
Additional reserves for unexpired risks are calculated as a product of unearned
premiums less deferred acquisition cost and the difference between the value of the loss
ratio and 100%.
MAPFRE MIDDLESEA p.l.c.
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90
2.Accounting policies - continued
2.14 Insurance and investment contracts - continued
(e) Liability adequacy test - continued
Additional tests are performed to check the adequacy of the unearned premiums and
unexpired risk reserves. The amounts of future gross claims and gross claim handling
costs are applied in these tests and compared with the amount of established provisions
for unearned premiums reduced by deferred insurance acquisition costs.
(f) Investment contracts without DPF
The Group issues investment contracts without DPF.
Premium arising on these contracts is classified as a financial liability – investment
contracts without DPF. The fair value of these contracts is dependent on the fair value
of underlying financial assets. These are designated at inception as fair value through
profit or loss. The fair value of a unit linked financial liability is determined using the
current unit values that reflect the fair values of the financial assets linked to the
financial liability. This is multiplied by the number of units attributed to the contract
holder at the reporting date.
If the investment contract is subject to a surrender option, the fair value of the financial
liability is never less than the amount payable on surrender, where applicable. Other
benefits payable are also accrued as appropriate.
2.15 Financial liabilities
Financial liabilities are initially recognised on the trade date, which is the date the
Company becomes a party to the contractual provisions of the instruments and
derecognises a financial liability when its contractual obligations are discharged,
cancelled or expire.
Borrowings are recognised initially at their fair value, net of incremental direct
transaction costs incurred. Borrowings are subsequently stated at amortised cost; any
difference between the proceeds (net of incremental direct transaction costs) and the
redemption value is recognised in the profit or loss account over the period of the
borrowings using the effective interest method. Borrowings are classified as current
liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the end of the reporting year.
Fees paid on the establishment of loan facilities are recognised as transaction cost of the
loan to the extent that it is probable that some or all of the facility will be drawn down.
In this case, the fee is deferred until the draw-down occurs. To the extent there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is
capitalised as a pre-payment for liquidity services and amortised over the period of the
facility to which it relates.
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2.Accounting policies - continued
2.16 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in
the profit or loss account, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. The amount of current tax payable or
receivable is the best estimate of the tax amount expected to be paid or received that
reflects uncertainty related to income taxes, if any.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the statements of financial position date in the countries where
the Company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation and establishes
provision where appropriate.
Deferred income tax is recognised in respect of temporary differences arising between
the tax bases of assets and liabilities and their carrying values for financial reporting
purposes. However, if the deferred income tax arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or loss, it is not accounted
for. Deferred income tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates (and laws) that have been
enacted or substantively enacted at the reporting date and reflect uncertainty relating to
income taxes, if any. Deferred tax is expected to apply when the related deferred tax
asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that future taxable profit or taxable
capital gains will be available such that realisation of the related tax benefit is probable.
Deferred income tax is provided on temporary differences arising on investments in
subsidiaries and associates, except where the Group controls the timing of the reversal
of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future
If the amount of taxable temporary differences is insufficient to recognise a deferred
tax asset in full, then future taxable profits, adjusted for reversals of existing temporary
differences are considered. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability of future taxable profit
improves.
Deferred income tax assets and liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and when the deferred
income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an
intention to settle the balance on a net basis.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.16 Current and deferred income tax - continued
Deferred tax related to fair value re-measurements charged or credited directly in other
comprehensive income or to equity, is also credited or charged directly to equity and
subsequently recognised in the profit or loss account together with the deferred gain or loss.
2.17 Provisions for pension obligations
Provisions are recognised when the Group has a present legal or constructive obligation as
a result of past events, it is probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate of the amount can be made.
A defined benefit plan defines an amount of pension that an employee will receive on
retirement. In the Group’s case, this amount is dependent upon an employee’s final
compensation upon retirement.
The liability recognised in the statement of financial position is the present value of the
defined benefit obligation at the end of the reporting period. The present value of a defined
benefit obligation is determined by discounting the estimated future cash outflows using
interest rate yields of government or high-quality corporate bonds that are denominated in
the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in assumptions
are charged or credited to other comprehensive income in the period in which they arise.
2.18 Revenue recognition
R evenue comprises the fair value of the consideration received or receivable for the sale of
services in the ordinary course of the Group’s activities. The Group recognises revenue
when the amount of revenue can be reliably measured, it is probable that future economic
benefits will flow to the entity and when specific criteria have been met as described
below.
Rendering of services
Premium recognition is described in Note 2.14 dealing with insurance contracts and
investment contracts with DPF.
Revenue arising from the issue of investment contracts without DPF and other related
services offered by the Group, is recognised in the accounting period in which the services
are rendered.
Fees include investment management fees arising from services rendered in conjunction
with the issue and management of investment contracts where the Group actively manages
the consideration received from its customers to fund a return that is based on the
investment profile that the customer selected on origination of the instrument. The Group
recognises these fees on a straight-line basis over the estimated life of the contract.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.18 Revenue recognition - continued
Rendering of services - continued
The Group charges its customers for management and other related services using the
following different approaches:
–Front-end fees are charged to the client on inception. The consideration received is
deferred as a liability and recognised over the life of the contract on a straight-line
basis.
–Regular fees are charged to the customer periodically (monthly, quarterly, half
yearly or annually) either directly or by making a deduction from invested funds.
Regular charges billed in advance are recognised on a straight-line basis over the
billing period.
Other revenue receivable by the Group mainly comprises commission or trailer fees
receivable on account of investment or other services provided in an intermediary
capacity which is accounted for on an accruals basis.
2.19 Investment return
Investment return includes dividend income, gains on financial assets at fair value
through profit or loss (including interest income from financial assets classified as fair
value through profit or loss), other net fair value movements, interest income from
financial assets not classified as fair value through profit or loss, rental income
receivable, share of associated undertaking’s result, and is net of investment expenses,
charges and interest payable.
(a) Dividend income
Dividend income is recognised in the profit or loss account as part of investment
income when the right to receive payment is established.
(b) Other net fair value gains/(losses) from financial assets at fair value through profit or
loss
Other gains or losses arising from changes in the fair value of the ‘Financial assets at
fair value through profit or loss’ category are presented in the profit or loss account
within ‘other investment income’ or ‘investment expenses and charges’ in the period in
which they arise.
(c) Interest income
Interest income from financial assets not classified as fair value through profit or loss is
recognised using the effective interest method.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.19 Investment return - continued
(d) Rental income
Rental income from investment property is accounted for on an accruals basis in
accordance with the substance of the relevant lease agreements.
Investment return is initially recorded in the non-technical account, except for income
attributed to long term business which is recognised immediately in the long term
business technical account. A transfer is made from the non-technical account to the
general business technical account of the actual investment return on investments
supporting the insurance technical provisions. With respect to the Group's long-term
business the investment return is apportioned between the technical and non-technical
profit or loss accounts on a basis which takes into account that technical provisions are
fully backed by investments and that intangible assets, property, plant and equipment,
and working capital are financed in their entirety from shareholders’ funds.
2.20 Leases
At inception of a contract, the Group assess whether a contract is, or contains, a lease.
A contract is or contains a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration. To assess whether a
contract conveys the right to control the use of an identified asset, the Group uses the
definition of a lease in IFRS 16.
At commencement or on modification of a contract that contains a lease component, the
Group allocates the consideration in the contract to each lease component on the basis
of its relative stand-alone price.
(a) As a lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a
finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease
transfers substantially all of the risks and rewards incidental to ownership of the
underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an
operating lease. As part of this assessment, the Group considers certain indicators such
as whether the lease is for the major part of the economic life of the asset.
The Group recognises lease payments received under operating leases as income on a
straight line basis over the lease term as part of ‘other income’ – Note 9.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.20 Leases - continued
(b) As a lessee
A lessee recognises a right-of-use asset representing its right to use the underlying asset
and a lease liability representing its obligation to make lease payments. As described
later in this note there are recognition exemptions for short-term leases and leases of
low-value items.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from
the commencement date to the end of the lease term, unless the lease transfers
ownership of the underlying asset of the Group by the end of the lease term or the cost
of the right-of-use asset reflects that the Group will exercise a purchase option. In that
case the right-of-use asset will be depreciated over the useful life of the underlying
asset, which is determined on the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that
are not paid at the commencement date, discounted using the interest rate implicit in the
lease or, if that rate cannot be readily determined, the Group’s incremental borrowing
rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by using interest rate curves by
country and termination dates, coordinated in a centralized manner, in which the
interest rate calculation is obtained by adding the differential related to the asset’s
nature. Interest rate curves are reviewed twice a year.
Lease payments included in the measurement of the lease liability comprise the
following:
–fixed payments (including payments which are essentially fixed), minus any
incentive to lease to be paid;
–the price for exercising a purchase option which the lessee is reasonably certain to
exercise; and
–payments for early cancellation.
MAPFRE MIDDLESEA p.l.c.
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2.Accounting policies - continued
2.20 Leases - continued
(b) As a lessee - continued
The lease liability is measured at amortised cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising from a change in
rate, if there is a change in the Group’s estimate of the amount expected to be payable
under a residual value guarantee, if the Group changes its assessment of whether it will
exercise a purchase, extension or termination option or if there is a revised in-substance
fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made
to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use asset that do not meet the definition of investment
property in ‘Right-of-use assets’.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases
of low-value assets and short-term leases. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
A lease modification is defined as a change in the scope of a lease, or the consideration
for a lease, that was not part of the original terms and conditions of the lease. A lease
modification includes adding or terminating the right to use one or more underlying
assets, or extending or shortening the contractual lease term.
A lease modification is accounted for in one of two ways;
•It is treated as a separate lease; or
•It is not treated as a separate lease.
A modification will only be treated as a separate lease if it involves the addition of one
or more underlying assets at a price that is commensurate with the standalone price of
the increase in scope. All other modifications are not treated as a separate lease.
Modifications, taken place during 2021 include changes in lease consideration and
extension of lease term all of which do not constitute a separate lease.
2.21 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the
period in which an obligation to pay a dividend is established.
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3.Use of accounting estimates and judgements in applying accounting policies
The Group makes estimates and assumptions concerning the future. Estimates and
judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under
the circumstances.
Information about judgements made in applying accounting policies that have the most
significant effects on the amounts recognised in the financial statements is included in
the following notes, which also include information about assumptions and
uncertainties at 31 December 2022 that have a significant risk of resulting in a material
adjustment in the carrying amounts of assets and liabilities in the next financial year.
- Value of in-force business
The Group’s value of in-force business is a projection of future shareholders’ cash
flows expected from contracts in force at the year end, appropriately adjusted for
taxation and discounted by a risk adjusted discount rate. In assessing the projected cash
flows, the directors assume a long term view of a maintainable level of investment
return and fund size. This valuation requires the use of a number of assumptions
relating to future mortality, persistency, levels of expenses, investment returns and asset
allocations over the longer term. This valuation is inherently uncertain and assumptions
are reviewed on an annual basis as experience and the reliability of the estimation
process develop.
Details of key assumptions, and sensitivity of this intangible asset are provided in Note
16. The impact of a change to key assumptions supporting the value of in-force
business as at 31 December 2022 is disclosed in Note 16 to the accounts.
- Insurance and investment contracts liabilities
(a)General business insurance contract liabilities
For general business insurance contracts, estimates have to be made both for the
expected ultimate cost of claims reported and those incurred but not yet reported at the
reporting date. The ultimate cost of claims is derived by using a standard actuarial
claims projection technique, the Chain Ladder method. The key assumption underlying
this technique is that past claims development experience can be used to project future
claims development and hence ultimate claims costs. Historical claims development is
mainly analyzed by accident years, as well as by specific business lines.
Claims reserves which are not adjusted for the ultimate cost, particularly those
involving fatalities and/or serious bodily injuries, are reserved at the case-by-case
reserve estimate. The measurement of claim payments due by the Company involves
the assessment of future settlements and is therefore dependent on assumptions around
determining such reserves based on, among others, legal precedent and current trends in
compensation awards. The assumptions considered to be key in this regard are
determining (i) the inputs to the compensation awarded for loss of future income; and
(ii) whether certain claims will be settled out of court or otherwise, which would have a
significant impact on the determination of legal costs.
MAPFRE MIDDLESEA p.l.c.
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98
3.Use of accounting estimates and judgements in applying accounting policies -
continued
- Insurance and investment contracts liabilities - continued
(a)General business insurance contract liabilities - continued
Due to the degree of estimation uncertainty underlying the key assumptions outlined
above, the amounts recognised in the financial statements may result to be different
from the actual amounts and these differences may be material.
(b)Insurance and participating investment contract liabilities
The technical provisions in respect of long term contracts and linked long term
contracts are subject to an annual statutory valuation using generally accepted actuarial
practice.
Different principles and valuation methodologies are adopted depending on the type
and generation of products. Further key assumptions used in determining the technical
provisions in respect of insurance contracts and investment contracts with DPF are
described in Note 24 to the financial statements.
- Investment property
The fair value of investment properties which involves judgement and estimation
uncertainty, is determined by qualified valuers. The assumptions used are reviewed on
an annual basis.
The key assumptions used in determining the value of investment property is described
in Note 19 to the financial statements.
- Consolidation of entities in which the Group holds less than majority of voting rights
The Group considers that it controls MAPFRE MSV Life p.l.c. (‘MMSV’) even though
it does not own more than 50% of the voting rights. This is because strategic, operating
and financing policies of MMSV are directed by means of shareholders’ agreement
which provides MAPFRE Middlesea p.l.c. with the right to select, appoint and remove
the key management personnel of MMSV and approve its business plan and capital
expenditure.
For all the financial years up to 31 December 2010, MMSV was considered to be an
associate and was accounted for using the equity method. Following the shareholders’
agreement, on 29 July 2011, MAPFRE Middlesea p.l.c. acquired control over MMSV
based on the factors explained in this note and started consolidating MMSV as from
that date.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
99
4.Management of risk
The Group is a party to contracts that transfer insurance risk and/or financial risk. This
section summarises these risks and the way that the Group manages them.
4.1 Insurance risk
The risk under any one insurance contract is the possibility that the insured event occurs
and the uncertainty of the amount of the resulting claim. By the very nature of an
insurance contract, this risk is fortuitous.
For a portfolio of insurance contracts where the theory of probability is applied to
pricing and provisioning, the principal risk that the Group faces under its insurance
contracts is that the actual claims and benefit payments are significantly different to the
amounts included within technical provisions. This could occur because the frequency
or severity of claims and benefits are greater or lower than estimated. Insurance events
are fortuitous and the actual number and amount of claims and benefits may vary from
year to year from the estimate established using statistical and actuarial techniques.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller
the relative variability about the expected outcome will be. In addition, a more
diversified portfolio is less likely to be affected across the board by a change in any
subset of the portfolio. The Group has developed its insurance underwriting strategy to
diversify the type of insurance risk accepted and within each of these categories to
achieve a sufficiently large population of risks to reduce the potential variability of the
expected outcome.
Factors that aggravate insurance risk include lack of risk diversification in terms of type
and amount of risk and geographical location. The Group is largely exposed to
insurance risk in one geographical area, Malta.
(a) Short term business insurance contracts – general insurance
Frequency and severity of claims
The terms and conditions of the contracts set out the bases for the determination of the
Group’s liability should the insured event occur. The risks underwritten include
accident and health, motor (including third party liability), marine and transport, fire
and other damage to property, liability and group life. Details of gross premiums
written as well as the insurance liabilities analysed by class are provided in the
“Segment information” (Note 6).
The frequency and severity of claims can be affected by several factors. The following
are considered by the Group to be the most significant:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
100
4.Management of risk - continued
4.1 Insurance risk - continued
(a) Short term business insurance contracts - general insurance - continued
Frequency and severity of claims - continued
-The increasing levels of court awards in cases where damages are suffered as a
result of injuries, the divergence of awards that is dependent on the territory of the
claim and the jurisdiction of the court, the effect of inflation due to the prolonged
period typically required to settle such cases; and
- The risk of a single event that can extensively affect a multiple of individual risks
to which the Group is exposed.
The Group manages these risks through its underwriting strategy, adequate reinsurance
arrangements and proactive claims handling.
The underwriting strategy ensures that the risks underwritten are well diversified in
terms of type and amount of risk. The Group follows strict underwriting guidelines and
sets limits on the overall retention of risk that it carries. Any risk in excess of this limit
is either reinsured under a facultative cover note or is declined. Underwriting limits are
in place to enforce appropriate risk selection criteria. In certain circumstances, certain
exclusions to risks are included within these guidelines. For example, the Group does
not insure US risks unless they are incidental. The Group can impose deductibles to
help manage its costs. It also uses its experience and expertise to mitigate the risk of
fraudulent claims. Insurance contracts also entitle the Group to pursue third parties for
payment of some or all of the costs (i.e. subrogation). A significant portion of the
Group’s business is underwritten through an agency distribution network.
Underwriting authority limits are set for individual agencies or branches, and any
contracts through which the Group is committed to cover risks in excess of these
authority limits require head office approval.
The Group has reinsurance protection in place for all classes of business. The type of
reinsurance cover, and the level of retention, is based on the Group’s internal risk
management assessment which takes into account the risk being covered, the sums
assured and the geographical location of the risk. The Board approves each reinsurance
programme on an annual basis. The reinsurance arrangements include a mix of
proportional, facultative and non-proportional covers, which limit the liability of the
Group to any one individual claim or event. Generally the Group’s policy is to place
reinsurance with listed multinational reinsurance companies whose credit rating is not
less than BBB. No rating limitation shall apply to treaty placements with MAPFRE Re
or any MAPFRE Group company designated to write any or all of the MAPFRE Group
Reinsurance treaties. At 31 December 2022, MAPFRE Re’s rating stood at A. The
Board will monitor the security rating of MAPFRE on a periodic basis.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
101
4.Management of risk - continued
4.1 Insurance risk - continued
(a)Short term business insurance contracts - general insurance - continued
Frequency and severity of claims - continued
The Group has specialised claims units dealing with the mitigation of risks surrounding
known claims. These units investigate and adjust claims as appropriate. Claims are
individually reviewed regularly, and are adjusted to reflect the latest information on the
underlying facts, current law, jurisdiction, contractual terms and conditions and other
factors. The Group actively manages and pursues early settlement of claims to reduce
its exposure to unpredictable developments. Authority limits are set for the settlement
of claims through the individual agents. Any claims incurred above these limits are
referred to head office for handling. In addition, all claims involving bodily injury are
referred to head office irrespective of their amount.
Concentration of insurance risk
Up until 31 December 2022, 100% of the Group’s business was written in Malta (2021:
100%). The portfolio is diversified in terms of type of business written, with motor
comprehensive business comprising 24% (2021: 23%) and accident and health
comprising 22% (2021: 20%) of the total portfolio (including Group Life business).
Other significant insurance business classes include motor liability business at 23%
(2021: 24%) and fire and other damage to property at 17% (2021: 18%). The
remaining 14% (2021: 15%) of premium written is generated across a spread of classes
including marine, other non-motor liability business and long term business. Further
information on premiums written, and claims incurred by insurance business class is
provided in Note 6 to these financial statements.
Sources of uncertainty in the estimation of future claim developments and payments
Claims on contracts are accounted for on a claims-occurrence basis. The Group is
liable for all insured events that occurred during the term of the contract, even if the
loss is discovered after the end of the contract term. Certain classes of business, most
notably those exposed to liability, can take several years to develop and are therefore
subject to a greater degree of uncertainty than other classes of business which are
typically settled in a shorter period of time.
The estimated cost of claims includes direct expenses to be incurred in settling claims,
net of the expected subrogation value and recoveries. The Group takes all reasonable
steps to ensure that it has appropriate information regarding its claims exposures.
However, given the uncertainty in establishing claims provisions, it is possible that the
final outcome will prove to be different from the original liability established.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
102
4.Management of risk - continued
4.1 Insurance risk - continued
(a)Short term business insurance contracts - general insurance - continued
Sources of uncertainty in the estimation of future claim developments and payments -
continued
In calculating the estimated cost of unpaid claims, the Group considers the results of
estimation techniques that are based partly on known information at year-end and partly
on statistical analysis of historical experience. In the case of the main classes of
business, motor and health, the Company makes use of Development Factor Models
(DFM) through Chains Ladder techniques to project the ultimate cost of the claims
reported and those incurred but not yet reported (IBNR). Ultimate cost averages applied
are based on claim averages acquired from historical data. In other classes of business
validation techniques are used to ensure the sufficiency of case reserves which could
lead to an IBNR provision being made. Allowance is made, however, for changes or
uncertainties which may create distortions in the underlying statistics or which might
cause the cost of unsettled claims to increase or reduce when compared with the cost of
previously settled claims.
Note 24 presents the development of the estimate of ultimate claim cost for claims
notified in a given year.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
103
4.Management of risk - continued
4.1 Insurance risk - continued
(b) Long term business insurance contracts
Frequency and severity of claims
For contracts where death is the insured risk, the most significant factor that could
increase the overall frequency of claims are epidemics or wide spread changes in
lifestyle resulting in earlier or more claims than expected.
At present these risks do not vary significantly in relation to the location of the risk
insured by the Group. However, undue concentration by amounts could have an impact
on the severity of benefit payments on a portfolio basis.
For contracts with fixed and guaranteed benefits and fixed future premiums, there are
no mitigating terms and conditions that reduce the insurance risk accepted. For
contracts with DPF, the participating nature of the contracts results in a portion of the
insurance risk being reduced over the term of policy. Investment contracts with DPF
carry negligible insurance risk.
The Group manages these risks through its underwriting strategy and reinsurance
arrangements. The underwriting strategy is intended to ensure that the risks
underwritten are well diversified in terms of type of risk and level of insured benefits.
Medical selection is also included in the Group’s underwriting procedures with
premiums varied to reflect the health condition and life expectancy of the applicants.
The Group has reinsurance protection in place to cover death claims. The type of
reinsurance cover and the level of retention for each risk are based on the Group’s
internal risk management assessment, which takes account of the nature of the risk
covered and the sum assured. The reinsurance programme is approved by the Board
annually. The reinsurance arrangements in place include a mix of quota share,
facultative, excess of loss and catastrophe protection, which limits the liability of the
Group to any one individual life or event. The Group’s reinsurance is placed with
listed multinational reinsurance companies whose rating is not less than A.
Sources of uncertainty in the estimation of future benefit payments and premium
receipts
Uncertainty in the estimation of future benefit payments and premium receipts for long
term insurance contracts arises from the unpredictability of long term changes in
overall levels of mortality, and the variability in contract holder behaviour. The Group
uses appropriate base tables of standard mortality according to the type of contract
being written. The Group does not take credit for future lapses in determining the
liability for long term contracts.
Further detail on the process of estimation is provided in Note 24 to these financial
statements.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
104
4.Management of risk - continued
4.2 Financial risk
The Group is exposed to financial risks through its financial assets, financial liabilities
and insurance and reinsurance assets and liabilities. In particular, the key risk is that in
the long term, the proceeds from its financial assets are not sufficient to fund the
obligations arising from its insurance and investment contracts. The components of
financial risks for the Group are market risk (including cash flow and fair value interest
rate risk, equity price risk and currency risk), credit risk and liquidity risk. These risks
arise from open positions in interest rate, currency and equity products, all of which are
exposed to general and specific market movements. The risks that the Group primarily
faces due to the nature of its assets and liabilities are interest rate risk and equity price
risk.
The Group has developed its Asset/Liability management framework to further support
the manner in which these risk positions are managed. It actively manages its assets to
achieve a competitive rate of return within risk objectives delineated by asset liquidity
measures, duration targets and credit quality parameters. The respective Investment
Committees review and approve investment strategies on a periodic basis ensuring that
assets are managed efficiently and within approved risk mandates.
(a) Market risk
i) Cash flow and fair value interest rate risk
Short term insurance and other liabilities are not directly sensitive to the level of market
interest rates, as they are not discounted. In those instances where interest is payable
(e.g. in the case of damages awarded by the Courts), interest is included in the claims
cost whilst the investment income earned until the claim is settled is credited to the
profit or loss account as it accrues.
Insurance and investment contracts with DPF at Group level have benefit payments that
are fixed and guaranteed at the inception of the contract (for example, sum assured), or
as annual discretionary bonuses are declared. The Group’s primary financial risk on
these contracts is the risk that interest income and capital redemptions from the financial
assets backing the liabilities are insufficient to fund the guaranteed benefits payable.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
105
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued
The Group does not guarantee a positive fixed rate of return to its long-term contract
policyholders at the inception of a contract. The declaration of discretionary bonuses is
guided by the bonus philosophy of the Board of Directors. Once a reversionary bonus is
declared, it is guaranteed to be paid in full at maturity or on the prior death of the life
assured. Also policyholders have the option to withdraw their current year’s bonus
without any charges following the date the bonus is declared.
The bonus philosophy considers historic and current rates of return generated by the
Group’s investment portfolio as well as the Group’s expectations for future investment
returns. The impact of interest rate risk is mitigated by the presence of the DPF. These
guaranteed benefits increase as discretionary benefits are declared and allocated to
contract holders.
All insurance and investment contracts with a DPF feature can be surrendered before
maturity for a cash surrender value that is always less than the actual contract liability.
Cash surrender values are determined at the discretion of the Group, and can be varied
from time to time.
The primary factor affecting the level of cash surrender value is the investment return
earned on the assets of the Group. In addition, the cash surrender value is affected by
the expenses, tax and the cost of risk benefits (such as life cover) borne by the Group,
deductions to provide a return to shareholders, as well as profits and losses arising on
other contracts. The expenses include payment of commission, medical report expenses,
office administration costs and other expenses incurred in the setting up and
maintenance of the contract. At most, the cash surrender value will be the amount of the
actual liability reduced by the surrender charge (where applicable).
Furthermore, in respect of all contracts with DPF (with the exception of some contracts
that have been in force more than a certain number of years), the Group reserves the
right to increase the level of the surrender charge and, if necessary, to apply a Market
Value Reduction (‘MVR’). A MVR is a deduction which the Group may make on
surrender of a contract with DPF. For example, if the underlying investment return, after
allowing for expenses, tax, risk benefits, shareholder returns and adjustment for profits
or losses on other contracts is less than the return already provided for in the form of
reversionary bonuses, the Group may decide to apply a MVR.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
106
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued
The MVR serves to protect the interests of remaining investors and the Group, who
would otherwise have to subsidise the amount paid on surrendering contracts. The
Group does not apply a standard percentage deduction on all contracts but determines
the deduction to apply to each individual surrender at the time the surrender is made.
The amount depends on a number of factors including the length of time the contract
has been in force and the underlying investment return over the same time period. There
will be no MVR at maturity or on death. This means that at maturity or on death the
payment of the actual contract liability is guaranteed.
The cash surrender value may also be less than the total amount of premiums paid up to
the date of surrender. The Group is not required to, and does not, measure the effect of
the above embedded derivative at fair value.
The Group matches its insurance liabilities with a diversified portfolio of assets which
includes equity, debt securities and property. The return from debt and cash based
securities is subject to interest rate risk.
In general, the Group is exposed to risk associated with the effects of fluctuations in the
prevailing levels of market interest rates. Assets/liabilities issued at variable rates
generally expose the Group to cash flow interest risk. Assets/liabilities issued at fixed
rates generally expose the Group to fair value interest rate risk. Group investment
parameters exist to limit exposure to any one particular issuer and any one particular
security. Periodic reports are prepared at portfolio, legal entity and asset class level that
are circulated to the Group’s key management personnel.
Assets and liabilities exposed to interest rate risk and their maturities are analysed
below:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
107
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued

|  |  | 2022
| Group |  |  |  |  |  |
|  | Notes | Within 1 year | between 1 - 2 years | between 2 - 5 years | over 5 years | Total
|  |  | €’000 | €’000 | €’000 | €’000 | €’000
| Assets |  |  |  |  |  |
| Debt securities | 22 | 58,337 | 77,605 | 201,915 | 449,735 | 787,592
| Collective investment schemes |  | 243,126 | — | — | — | 243,126
| Loans and receivables: |  |  |  |  |  |
| - Deposits with banks and credit institutions | 22 | 96,091 | 20,637 | — | — | 116,728
| - Loans secured on policies | 22 | 9,132 | — | — | — | 9,132
| - Cash and cash equivalents | 27 | 137,286 | — | — | — | 137,286
| Total interest bearing assets |  | 543,972 | 98,242 | 201,915 | 449,735 | 1,293,864
| Liabilities |  |  |  |  |  |
| Long-term insurance contracts |  | — | — | — | 1,912,983 | 1,912,983
| Total interest bearing liabilities |  | — | — | — | 1,912,983 | 1,912,983

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
108
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued

|  |  | 2021
| Group |  |  |  |  |  |
|  | Notes | Within | Between | Between | Over |
|  |  | 1 year | 1 - 2 years | 2 - 5 years | 5 years | Total
|  |  | €’000 | €’000 | €’000 | €’000 | €’000
| Assets |  |  |  |  |  |
| Debt securities | 22 | 33,601 | 68,426 | 237,667 | 671,791 | 1,011,485
| Collective investment schemes |  | 197,691 | — | — | — | 197,691
| Loans and receivables: |  |  |  |  |  |
| - Deposits with banks and credit institutions | 22 | 144,550 | 60,338 | — | — | 204,888
| - Loans secured on policies | 22 | 8,035 | — | — | — | 8,035
| - Cash and cash equivalents | 27 | 71,443 | — | — | — | 71,443
| Total interest bearing assets |  | 455,320 | 128,764 | 237,667 | 671,791 | 1,493,542
| Liabilities |  |  |  |  |  |
| Long-term insurance contracts |  | — | — | — | 2,276,558 | 2,276,558
| Total interest bearing liabilities |  | — | — | — | 2,276,558 | 2,276,558

|  |  | 2022
| Company |  |  |  |  |  |
|  | Notes | Within | Between | Between | Over |
|  |  | 1 year | 1 - 2 years | 2 - 5 years | 5 years | Total
|  |  | €’000 | €’000 | €’000 | €’000 | €’000
| Assets |  |  |  |  |  |
| Debt securities | 22 | — | 854 | 6,962 | 2,525 | 10,341
| Loans and receivables: |  |  |  |  |  |
| - Cash and cash equivalents | 27 | 11,130 | — | — | — | 11,130
| Total interest bearing assets |  | 11,130 | 854 | 6,962 | 2,525 | 21,471

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
109
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued

|  |  | 2021
| Company |  |  |  |  |  |
|  | Notes | Within | Between | Between | Over |
|  |  | 1 year | 1 - 2 years | 2 - 5 years | 5 years | Total
|  |  | €’000 | €’000 | €’000 | €’000 | €’000
| Assets |  |  |  |  |  |
| Debt securities | 22 | 101 | — | 2,747 | 3,489 | 6,337
| Loans and receivables: |  |  |  |  |  | —
| - Cash and cash equivalents | 27 | 11,575 | — | — | — | 11,575
| Total Interest bearing assets |  | 11,676 | — | 2,747 | 3,489 | 17,912

The Company had no interest bearing liabilities as at 31 December 2022 and 2021.
Assets and liabilities issued at variable rates expose the Group to cash flow interest rate
risk whilst assets and liabilities issued at fixed rates expose the Group to fair value
interest rate risk. The overall exposure to these two risks is as follows:

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| Assets held at variables rates |  |
| Debt securities | 67,608 | 72,637
| Cash and cash equivalents | 928 | 8,207
|  | 68,536 | 80,844
| Liabilities issued at variable rates |  |
| Net long term insurance contracts | 1,912,983 | 2,276,558
|  | 1,912,983 | 2,276,558

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
110
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued
Interest rate risk in relation to linked liabilities for contracts that also combine a
discretionary feature amounting to €48.17 million (2021: €55.03 million) has been
excluded as the directors consider the exposure to be insignificant.

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Assets held at fixed rates |  |  |  |
| Debt securities | 719,984 | 938,848 | 10,341 | 6,337
| Loans secured on policies | 9,132 | 8,035 | — | —
| Deposits with banks and credit institutions | 116,728 | 204,888 | — | —
| A component of equity securities and units in unit trusts | 243,126 | 197,691 | — | —
|  | 1,088,970 | 1,349,462 | 10,341 | 6,337

In managing its portfolio, during the year ended 31 December 2022, the Group entered
into fixed income security futures contracts. Accordingly, it is exposed to movements
in interest rates in the respective markets of the underlying, which comprise short,
medium and long-term sovereign debt. The notional amount of futures contracts
outstanding at 31 December is shown below:

| Group
| 2022 | 2021
| €’000 | €’000
Long positions |  |
- Federal Republic of Germany | 69,704 | 109,748
- United States Government | — | 1,040
| 69,704 | 110,788
Short positions |  |
- Federal Republic of Germany | 76,362 | 129,257
- United States Government | 2,730 | 2,416
| 79,092 | 131,673

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
111
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
i) Cash flow and fair value interest rate risk - continued
Up to the statements of financial position date the Group did not have any hedging
policy with respect to interest rate risk other than as described in note 2.9.
Sensitivity Analysis – interest rate risk
The sensitivity analysis for interest rate risk illustrates how changes in the fair value of
future cash flows of a financial instrument will fluctuate because of changes in market
interest rates at the reporting date.
At 31 December 2022, had interest rates been 100 basis points (2021: 100 basis points)
lower with all other variables held constant, the Group and Company pre-tax results for
the year would have been higher by €0.29 million (2021: higher by €0.74 million) and
higher by €0.04 million (2021: €0.04 million) respectively. An increase of 100 basis
points (2021: 100 basis points), with all other variables held constant, would have
resulted in the Group’s and Company’s pre-tax results for the year being lower by
€0.97 million (2021: lower by €2.23 million) and lower by €0.04 million (2021: €0.05)
respectively.
Managing interest rate benchmark reform
A fundamental reform of major interest rate benchmarks is being undertaken globally,
including the replacement of some interbank offered rates (IBORs) with alternative
nearly risk- free rates (referred to as ‘IBOR reform’). Currently the Group has no
exposures to IBORs on its financial instruments.
ii) Equity price risks
The Group’s financial assets are susceptible to the risk of decreases in value due to
changes in the prices of equities. The directors manage this risk of price volatility by
entering into a diverse range of investments including equities and collective
investment schemes. In addition, the Group’s investments are spread geographically in
a diverse number of different countries. The Group has active Investment Committees
that have established a set of investment guidelines that are also approved by the Board
of Directors. Investments over prescribed limits are directly approved by the respective
Boards. These guidelines provide parameters for investment management, including
contracts with external portfolio managers. They include, inter alia, reference to an
optimal spread of the investment portfolio, assessment of equity issuers and maximum
exposures by the Group to any one issuer and its connected parties (with the exception
of investments in Government paper). These parameters also consider solvency
restrictions imposed by the Regulator.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
112
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
ii) Equity price risks - continued
Management structures are in place to monitor all the Group’s overall market positions
on a frequent basis. Reports are prepared at portfolio, legal entity and asset and liability
class level that are circulated to the Group’s relevant key management personnel. These
are also reviewed by the respective Investment Committees and Boards.
The total assets subject to equity price risk are the following:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Assets subject to equity price risk | 753,882 | 908,624 | 1,756 | 2,045
| The above includes: |  |  |  |
| Component of investments in associated |  |  |  |
| undertakings (Note 21)* | 22,512 | 22,321 | — | —
| Component of equity securities and units |  |  |  |
| in unit trusts (Note 22) | 731,370 | 886,303 | 1,756 | 2,045
|  | 753,882 | 908,624 | 1,756 | 2,045

*Investments in associates (Note 21) amounting to €0.39 million (2021:€0.38 million)
for the Group and €0.39 million (2021: €0.38 million) for the Company have been
excluded from equity price risk since they are accounted for under the equity method.
I n the case of assets held to cover unit-linked liabilities the exposure is carried by the
contract holder. In the case of capital guaranteed products any shortfalls guaranteed
upon maturity are mitigated by a back to back guarantee with international financial
service providers as further referred in 4.2 (a) (i).
The sensitivity for equity price risk illustrates how changes in the fair value of equity
securities (excluding investments in associated undertakings) will fluctuate because of
changes in market prices, whether those changes are caused by factors specific to the
individual equity issuer, or factors affecting all similar equity traded in the market.
Given the investment strategy of the Group and Company, a 10% positive or negative
movement in equity prices is considered to be an appropriate benchmark for sensitivity
purposes. An increase and a decrease of 10% in equity prices, with all other variables
held constant, would result in a positive impact of €0.33 million (2021: €0.39 million)
and a negative impact of €0.33 million (2021: €0.39 million) on the Group’s pre-tax
profit and a positive or negative impact of €0.12 million on the Company’s pre-tax
results (2021: €0.14 million).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
113
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
iii) Currency risk
The Group and Company have assets and liabilities denominated in major foreign
currencies other than euro. The Group and Company are therefore exposed to currency
risk, as the value of assets and liabilities denominated in other currencies will fluctuate
due to changes in exchange rates. The Group hedges its foreign currency denominated
debt securities using forward exchange contracts in order to mitigate the risk that
principal cash flows for these investments fluctuate as a result of changes in foreign
exchange rates. The Group is also exposed to foreign currency risk arising from its
equity securities denominated in major foreign currencies. At 31 December 2022
foreign currency exposure amounted to €263.00 million (2021: €334.61 million).
The Group’s and Company’s exposure to exchange risk is limited through the
establishment of guidelines for investing in foreign currency and hedging currency risk
through forward exchange contracts were considered necessary. These guidelines are
approved by the respective Boards and a manageable exposure to currency risk is
thereby permitted.
The table below summarises the Group’s exposure to foreign currencies other than
euro.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
114
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
iii) Currency risk - continued
Group
31 December 2022

|  |  | Notional |
|  | Net exposure | amount of |
|  | before | currency | Net exposure
|  | hedging | derivatives | after hedging
|  | €’000 | €’000 | €’000
| Currency of exposure: |  |  |
| USD | 194,131 | 2,325 | 191,806
| CHF | 19,762 | — | 19,762
| GBP | 6,679 | 901 | 5,778
| SEK | 11,932 | — | 11,932
| DKK | 13,378 | — | 13,378
| HKD | 7,454 | — | 7,454
| Others | 19,687 | 6,801 | 12,886
|  | 273,023 | 10,027 | 262,996

Group
31 December 2021

|  |  | Notional |
|  | Net exposure | amount of |
|  | before | currency | Net exposure
|  | hedging | derivatives | after hedging
|  | €’000 | €’000 | €’000
| Currency of exposure: |  |  |
| USD | 295,887 | 65,317 | 230,570
| CHF | 29,450 | — | 29,450
| GBP | 18,566 | 9,752 | 8,814
| SEK | 15,122 | — | 15,122
| DKK | 19,277 | — | 19,277
| Others | 72,873 | 41,500 | 31,373
|  | 451,175 | 116,569 | 334,606

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
115
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
iii) Currency risk - continued
Within the table above, €238.20 million of the unhedged exposure relates to equity
investments (2021: €324.31 million). Due to an increasingly globalised economy, the
Group’s equity investments are diversified across various currencies. The directors
consider that the exposure to currency risk is appropriately captured in the equity price
risk sensitivity (Note 4.2(a)(ii)). Any residual currency exposure relating to non-equity
investments is not considered to be significant.
The table below summarises the Company’s exposure to foreign currencies other than
euro.
Company
31 December 2022

|  |  | Notional |
|  | Net exposure | amount of |
|  | before | currency | Net exposure
|  | hedging | derivatives | after hedging
|  | €’000 | €’000 | €’000
| Currency of exposure: |  |  |
| USD | (155) | — | (155)
| GBP | (33) | — | (33)
| Other | 2 | — | 2
|  | (186) | — | (186)

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
116
4. Management of risk - continued
4.2 Financial risk - continued
(a) Market risk - continued
iii) Currency risk - continued
Company
31 December 2021

|  |  | Notional |
|  | Net exposure | amount of |
|  | before | currency | Net exposure
|  | hedging | derivatives | after hedging
|  | €’000 | €’000 | €’000
| Currency of exposure: |  |  |
| USD | (72) | — | (72)
| GBP | 108 | — | 108
| Others | 2 | — | 2
|  | 38 | — | 38

The Company’s foreign exposure relates to foreign operations now in run-off.
(b) Credit risk
Credit risk is the risk of decreases in value when counterparties are not capable of
fulfilling their obligations or when a change in their credit status takes place. The
Group has exposure to credit risk, which is the risk that a counterparty will be unable
to pay amounts in full when due. Key areas where the Group is exposed to credit risk
are:
•Investments and cash and cash equivalents
•Reinsurers’ share of technical provisions
•Amounts due from reinsurers in respect of claims already paid
•Amounts due from insurance contract holders
•Amounts due from insurance intermediaries
•Counterparty risk with respect to forward foreign exchange contracts
The Group places limits on the level of credit risk undertaken from the main categories
of financial instruments. These limits also take due consideration of the solvency
restrictions imposed by the relevant Insurance Regulations. The investment strategy of
the Group considers the credit standing of the counterparty and control structures are in
place to assess and monitor these risk thresholds.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
117
4. Management of risk - continued
4.2 Financial risk - continued
(b) Credit risk - continued
The Group structures the levels of credit risk it accepts by limiting as far as possible its
exposure to a single counterparty or groups of counterparties. The Group has in place
internal control structures to assess and monitor credit exposures and risk thresholds.
The Group’s cash is placed with a number of core domestic credit institutions and
investment grade international banks, thereby reducing the concentration of
counterparty credit risk to an acceptable level.
Reinsurance is used to manage insurance risk. This does not, however, discharge the
Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason,
the Group remains liable for the payment to the policyholder. The creditworthiness of
reinsurers is monitored on a quarterly basis by reviewing credit grades provided by
rating agencies and other publicly available financial information, thereby ensuring the
continuous financial strength of the reinsurer. At the same time as the Board approves
the overall reinsurance protection of the Group, it ensures that the reinsurers’ credit
rating (either Standard & Poor’s or equivalent) is within the parameters set by it.
The Group is exposed to contract holders and intermediaries for insurance premium.
Credit agreements are in place in all cases where credit is granted, and in the case of
certain larger risks, premium payment warranties are in place. This limits the liability
of the Group towards the insured or any third party if the premium remains unsettled
after the credit period granted and allows the Group to cancel the policy ab initio, if
considered necessary. Records are kept of the payment history for significant contract
holders and intermediaries with whom regular business is conducted. Credit is not
granted to contract holders or intermediaries whose payment history is not satisfactory.
Credit risk with respect to debtors is further limited due to the large number of
customers comprising the Group’s debtor base.
The exposure to individual counterparties is also managed by other mechanisms, such
as the right to offset where counterparties are both debtors and creditors of the Group.
Management information reported to the Group includes details of provisions for
impairment on loans and receivables and subsequent write-offs. The Company
performs risk-based reviews to assess the degree of compliance with the Group’s
procedures on credit and take action accordingly.
The Group does not trade in derivative contracts, with the exception of forward
contracts and exchange traded futures. All derivative contracts are placed with quality
financial institutions within the parameters of a hedging policy approved by the Board.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
118
4. Management of risk - continued
4.2 Financial risk - continued
(b) Credit risk - continued
The total assets bearing credit risk are the following:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Debt securities | 787,592 | 1,011,485 | 10,341 | 6,337
| Other financial assets (including deposits with banks and other loans) | 116,728 | 204,888 | — | —
| Forward foreign exchange contracts | 2,698 | — | — | —
| Reinsurers share of technical provisions | 22,352 | 25,823 | 21,876 | 24,890
| Insurance and other receivables | 27,029 | 29,333 | 18,402 | 17,416
| Cash and cash equivalents | 137,286 | 71,443 | 11,130 | 11,575
| Total | 1,093,685 | 1,342,972 | 61,749 | 60,218

The carrying amounts disclosed above represent the maximum exposure to credit risk.
These assets are analysed in the table below using Standard & Poor’s rating (or
equivalent).

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| AAA | 115,968 | 159,144 | 1,976 | —
| AA | 179,400 | 239,071 | 2,642 | 2,834
| A | 273,745 | 327,557 | 23,990 | 25,676
| BBB | 386,998 | 465,102 | 9,542 | 9,761
| Below BBB or not rated | 137,574 | 152,098 | 23,599 | 21,947
|  | 1,093,685 | 1,342,972 | 61,749 | 60,218

Debt securities, loans and receivables and cash and cash equivalents that are not rated
are primarily held with highly reputable financial institutions.
The Company does not hold any collateral as security to its credit risk.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
119
4. Management of risk - continued
4.2 Financial risk - continued
(b) Credit risk - continued
Financial assets that are past due but not impaired
The following insurance and other receivables are classified as past due but not
impaired:

|  |  | Group and Company
|  |  |  | 2022 | 2021
|  |  |  | €’000 | €’000
| Within credit terms |  |  | 9,906 | 9,272
| Not more than three months |  |  | 3,450 | 3,263
| Within three to twelve months |  |  | 2,211 | 1,926
| Over twelve months |  |  | 441 | 716
|  |  |  | 16,008 | 15,177

IFRS 7 defines a financial asset as being past due when the counterparty has failed to
make a payment when contractually due. It goes further to stipulate that full disclosure
must be made of all balances due from this particular counterparty, including those,
which are still within credit terms and therefore not contractually due.
The overall exposure of the Group and Company in terms of IFRS 7 is €16.01 million
(2021: €15.18 million), of which €9.91 million (2021: €9.27 million) is not
contractually due. It is the view of the directors that no impairment charge is necessary,
due to the following reasons:
1.Settlements after year-end.
2.In cases where the amount has not been settled, agreement for settlement has
been reached or is being negotiated.
Trade receivables at 31 December 2022 did not comprise any amounts (2021: nil)
whose terms had been renegotiated from the original terms and which were classified
as fully performing.
Financial assets that are impaired
Within insurance and other receivables are the following receivables that are classified
as impaired against which a provision for impairment has been provided as per Note
26:

|  |  | Group and Company
|  |  |  | 2022 | 2021
|  |  |  | € | €
| Over twelve months |  |  | 440 | 387

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
120
4. Management of risk - continued
4.2 Financial risk - continued
(b) Credit risk - continued
A decision to impair an asset is based on the following information that comes to the
attention of the Group:
•Significant financial difficulty of the debtor.
•It becoming probable that the debtor will enter bankruptcy or other financial
reorganisation.
•A breach of contract, such as protracted default in payments
•The debtor has been referred to the in-house legal office.
(c) Liquidity risk
The Group is exposed to daily calls on its available cash resources mainly from claims
and benefits arising from insurance contracts. Liquidity risk is the risk that cash may not
be available to pay obligations when due at a reasonable cost. The Group manages its
funds in such a manner as to ensure an adequate portion of available funds to meet such
calls. With respect to life insurance contracts this is principally managed through limits
set by the Board of MMSV on the minimum proportion of maturing funds available to
meet such calls. Furthermore, the Group invests a majority of its assets in listed
investments that can be readily disposed of.
The following table indicates the expected timing of cash flows arising from the maturity
or settlement of Group’s liabilities. The expected cash flows do not consider the impact of
early surrenders on life insurance contracts.

|  | Group expected cash flows (€ millions) 2022
|  | 0-1 yr | 1-2 yrs | 2-3 yrs | 3-4 yrs | 4-5 yrs | >5 yrs | Total
| Technical provisions - Life insurance contracts and investment contracts with DPF | 296.9 | 212.7 | 176.5 | 155.8 | 122.1 | 1,044.5 | 2,008.5
| Technical provisions - claims outstanding | 15.3 | 6.0 | 3.6 | 2.5 | 1.2 | 25.6 | 54.2
| Lease liabilities | 0.4 | 0.4 | 0.3 | 0.2 | 0.2 | 0.2 | 1.7
| Insurance and other payables (contractual) | 28.0 | — | — | — | — | — | 28.0

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
121
4. Management of risk - continued
4.2 Financial risk - continued
(c) Liquidity risk - continued

|  | Group expected cash flows (€ millions) 2021
|  | 0-1 yr | 1-2 yrs | 2-3 yrs | 3-4 yrs | 4-5 yrs | >5 yrs | Total
| Technical provisions - Life insurance contracts and investment contracts with DPF | 338.9 | 264.6 | 219.8 | 191.5 | 163.2 | 1,199.7 | 2,377.7
| Technical provisions - claims outstanding | 14.6 | 5.8 | 3.2 | 2.5 | 1.1 | 26.6 | 53.8
| Lease Liabilities | 0.4 | 0.4 | 0.3 | 0.3 | 0.2 | 0.4 | 2.0
| Insurance and other payables (contractual) | 31.2 | — | — | — | — | — | 31.2

Expected cash flows on unit linked liabilities have not been included as the directors
consider that there is limited exposure to liquidity risk given that these are principally
backed by unit linked assets.

|  | Company expected cash flows (€ millions) 2022
|  | 0-1 yr | 1-2 yrs | 2-3 yrs | 3-4 yrs | 4-5 yrs | >5 yrs | Total
| Technical provisions - claims outstanding | 15.3 | 6.0 | 3.6 | 2.5 | 1.2 | 25.6 | 54.2
| Lease liabilities | 0.4 | 0.3 | 0.3 | 0.2 | 0.2 | 0.2 | 1.6
| Insurance and other payables (contractual) | 12.6 | — | — | — | — | — | 12.6

|  | Company expected cash flows (€ millions) 2021
|  | 0-1 yr | 1-2 yrs | 2-3 yrs | 3-4 yrs | 4-5 yrs | >5 yrs | Total
| Technical provisions - claims outstanding | 14.6 | 5.8 | 3.2 | 2.5 | 1.1 | 26.6 | 53.8
| Lease Liabilities | 0.4 | 0.3 | 0.3 | 0.3 | 0.2 | 0.40 | 1.9
| Insurance and other payables (contractual) | 13.4 | — | — | — | — | — | 13.4

The above cash flows are undiscounted other than those for Technical provisions –
Life insurance contracts and investment contracts with DPF, which liability is
determined as the sum of the expected discounted value of future cash flows.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
122
4. Management of risk - continued
4.2 Financial risk - continued
(c) Liquidity risk - continued
The table below analyses the Group’s derivative financial instruments that will be
settled on a gross basis. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying balances,
as the impact of discounting is not significant.

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| At 31 December |  |
| Foreign exchange contracts |  |
| - outflow | (97,744) | (128,215)
| - inflow | 100,443 | 127,440

At 31 December 2022 and 2021, the above derivatives were due to be settled within
three months after year end.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
123
4.Management of risk - continued
4.3 Fair values
The following table presents the assets measured in the statements of financial
position at fair value by level of the following fair value measurement hierarchy at 31
December 2022:
•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); and
•Inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs) (Level 3).
The Group recognises transfers between levels of the fair value hierarchy at the end of
the reporting period during which the change has occurred.
The following tables present the assets measured at fair value at 31 December 2022.

| Group |  |  |  |
|  | Level 1 | Level 2 | Level 3 | Total
|  | €'000 | €'000 | €'000 | €'000
| Assets |  |  |  |
| Financial assets at fair value through profit or loss |  |  |  |
| - Equity Securities, units in unit trusts and |  |  |  |
| collective investment schemes | 973,661 | 40,912 | 61,609 | 1,076,182
| - Debt Securities | 529,741 | 248,113 | — | 777,854
| Other available-for-sale investments | 5,605 | 4,703 | — | 10,308
| Derivative financial instruments | — | 2,698 | — | 2,698
| Investment in associated undertakings | — | 22,647 | — | 22,647
| Total assets | 1,509,007 | 319,073 | 61,609 | 1,889,689

| Liabilities |  |  |  |
| Unit linked financial liabilities | — | 102,256 | — | 102,256
| Total liabilities | — | 102,256 | — | 102,256

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
124
4.Management of risk - continued
4.3 Fair values - continued

| Company |  |  |
|  | Level 1 | Level 2 | Total
|  | €'000 | €'000 | €'000
| Assets |  |  |
| Financial assets at fair value through profit and loss |  |  |
| - Equity Securities, units in unit trusts and collective investment schemes | — | 1,186 | 1,186
| - Debt Securities | 603 | — | 603
| Other available-for-sale investments | 5,605 | 4,703 | 10,308
| Total assets | 6,208 | 5,889 | 12,097

The following table presents the changes in Level 3 instruments for the year ended 31
December:
The following tables present the assets measured at fair value at 31 December 2021.

| Group |  |  |  |
|  | Level 1 | Level 2 | Level 3 | Total
|  | €'000 | €'000 | €'000 | €'000
| Assets |  |  |  |
| Financial assets at fair value through profit or loss |  |  |  |
| - Equity Securities, units in unit trusts and collective investment schemes | 1,129,261 | 48,834 | 18,756 | 1,196,851
| - Debt Securities | 691,704 | 314,202 | — | 1,005,906
| Other available-for-sale investments | 4,265 | 1,965 | — | 6,230
| Investment in associated undertakings | — | 22,449 | — | 22,449
| Total assets | 1,825,230 | 387,450 | 18,756 | 2,231,436
| Liabilities |  |  |  |
| Unit linked financial liabilities | — | 113,509 | — | 113,509
| Derivative financial instruments | — | 775 | — | 775
| Total liabilities | — | 114,284 | — | 114,284

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
125
4.Management of risk - continued
4.3 Fair values - continued

| Company |  |  |
|  | Level 1 | Level 2 | Total
|  | €'000 | €'000 | €'000
| Assets |  |  |
| Financial assets at fair value through profit or loss |  |  |
| - Equity Securities, units in unit trusts and collective investment schemes | — | 1,393 | 1,393
| - Debt Securities | 758 | — | 758
| Other available-for-sale investments | 4,265 | 1,965 | 6,230
| Total assets | 5,023 | 3,358 | 8,381

Fair value measurements classified as Level 1 include government debt securities, units
in unit trusts and collective investments schemes and foreign listed equities.
Corporate debt securities are classified as Level 2 in view of their trading
characteristics. The financial liabilities for unit linked contracts were classified as Level
2. The fair value of these contracts is determined using the current unit values that
reflect the fair values of the financial assets (classified as Level 1) linked to the
financial liability. D erivative foreign exchange forward contracts have been classified
as Level 2. The fair value of these instruments is determined by reference to market
observable forward currency rates and interest rates. Domestic equities are classified as
Level 2 in view of their trading characteristics.
At 31 December 2022, 3.3% (2021:0.9%) of the financial assets measured at fair value
on a recurring basis were classified as Level 3. They constitute investment in unlisted
equities. The Group has €61.6m (2021:€18.8m) assets classified as Level 3, the
valuation of which has been determined by reference to the net assets of the underlying
investment.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
126
4.Management of risk - continued
4.3 Fair values - continued

| Group |
| 2021 |
|  | Equity securities
|  | €'000
| Opening balance | —
| Additions | 18,558
| Total gains recognised in profit or loss | 198
| Closing balance | 18,756
| 2022 |
| Opening balance | 18,756
| Additions | 38,363
| Total gains recognised in profit or loss | 4,490
| Closing balance | 61,609

The analysis of investment property is included within Note 19.
At 31 December 2022 and 2021, the carrying amount of the Group’s and Company’s
other financial assets and liabilities approximated their fair values with the exception of
the subsidiary’s financial liabilities emanating from investment contracts with DPF. It
is impractical to determine the fair value of these contracts due to the lack of a reliable
basis to measure the future discretionary return that is a material feature of these
contracts.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
127
5.Capital management
The Group’s policy is to maintain a strong capital base to support its business growth
plans and comply with all regulatory requirements on an ongoing basis whilst assessing
the impact of shareholder returns on its capital employed. The Group defines capital as
shareholders’ equity.
The Group’s objectives when managing capital are to:
•comply with the obligations to hold Eligible Own Funds to cover the Solvency
Capital Requirement and Minimum Capital Requirement in terms of the Insurance
Business Act, 1998, (Chapter 403, Laws of Malta) and the applicable Insurance
Rules issued under the Insurance Business Act (‘Insurance Rules’) by the Malta
Financial Services Authority (‘MFSA’);
•provide for the capital requirements of the companies within the Group;
•safeguard the Group’s and individual component companies’ ability to continue as a
going concern and provide returns for shareholders and benefits for other
stakeholders; and
•to provide an adequate return to shareholders by pricing insurance contracts
commensurate with the level of risk.
The individual insurance Group companies are required to hold regulatory capital for
their non-life and life assurance business in compliance with the Insurance Rules issued
by the MFSA. The minimum capital requirements must be maintained at all times
throughout the period. The individual Group companies monitor the level of their own
funds on a regular basis. Any transactions that may potentially affect the individual
company’s own funds and solvency position are immediately reported to their
respective directors and shareholders for resolution.
The Company’s Minimum Capital Requirement Absolute Floor stands at €8,000,000,
up from the €7,400,000 in the previous year, as per paragraph 5.6.4 of Chapter 5
(‘Valuation of assets and liabilities, technical provisions, own funds, Solvency Capital
Requirement, Minimum Capital Requirement and investment rules’) of Part B of the
Insurance Rules.
Based on management calculations to date, the Company is sufficiently capitalised and
was compliant at all times with the regulatory capital requirements as stipulated by the
MFSA which are in line with the Solvency II requirements. All other companies within
the Group were also compliant with the respective minimum regulatory requirements
throughout the financial period as per management calculations to date.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
128
6.Segment information
Management has determined the operating segments based on the reports reviewed by
the Executive Management team that are used to make strategic decisions. In
identifying the Group’s business segments, the chief operating decision-maker is also
guided by the Regulations under the Insurance Business Act, 1998 on the disclosure
requirements relevant to specified insurance classes of business.
The Group operates in two main business segments, general business, that is further
sub-divided into various insurance business classes, and long-term business. The
segment results for the years ended 31 December 2022 and 2021 are indicated below.
General business
Gross premiums written and gross premiums earned by class of business

|  | Group and Company
|  | Gross premiums written | Gross premiums earned
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Direct insurance |  |  |  |
| Motor (third party liability) | 19,852 | 19,131 | 19,097 | 18,843
| Motor (other classes) | 20,875 | 18,615 | 20,082 | 18,334
| Fire and other damage to property | 15,089 | 14,550 | 14,619 | 13,554
| Accident & Health | 18,986 | 16,093 | 18,098 | 15,358
| Other classes | 9,637 | 9,224 | 9,864 | 8,545
|  | 84,439 | 77,613 | 81,760 | 74,634

100% (2021: 100%) of consolidated gross premiums written for direct general
insurance business emanate from contracts concluded in or from Malta. All premiums
emanate from external customers and there is no business transacted between segments
other than as disclosed in Note 35.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
129
6. Segment information - continued
General business - continued
Gross claims incurred, gross operating expenses and reinsurance balance by class of business

|  | Group and Company
|  | Gross claims incurred | Gross operating expenses | Reinsurance balance
|  | 2022 | 2021 | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000 | €'000 | €'000
| Direct insurance |  |  |  |  |  |
| Motor (third party liability) | 18,707 | 21,820 | 6,210 | 6,243 | (902) | (1,984)
| Motor (other classes) | 8,390 | 5,474 | 6,530 | 5,552 | 152 | 160
| Fire and other damage to property | 4,281 | 3,703 | 4,865 | 4,534 | 4,822 | 4,710
| Accident & Health | 8,781 | 6,883 | 6,009 | 5,192 | 190 | 232
| Other classes | 2,577 | 2,218 | 4,086 | 3,464 | 2,128 | 1,481
|  | 42,736 | 40,098 | 27,700 | 24,985 | 6,390 | 4,599

The reinsurance balance represents the charge/(credit) to the technical account arising
from the aggregate of all items relating to reinsurance outwards.
Long term business
(i)Gross premium written

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Gross premiums written |  |  |  |
| Direct insurance | 251,439 | 327,632 | 2,680 | 2,497

The long-term business is mainly written through its subsidiary undertaking MAPFRE
MSV Life p.l.c. (‘MSV’).
Group direct insurance is further analysed between:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
130
6. Segment information - continued
Long term business - continued
(i)Gross premium written - continued

|  | Periodic premiums | Single premiums
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Non-participating | 17,599 | 17,107 | — | —
| Participating | 44,203 | 42,186 | 184,696 | 264,353
| Linked | 1,858 | 1,967 | 3,083 | 2,019
|  | 63,660 | 61,260 | 187,779 | 266,372

In addition to the above, premium credited to liabilities in Note 24 in relation to linked
products classified as investment contracts without DPF was as follows:

|  | Periodic premiums | Single premiums |
|  | 2022 | 2021 | 2022 | 2021 |
|  | €'000 | €'000 | €'000 | €'000 |
| Investment contracts | 3,777 | 2,603 | 2,373 | 1,456 |

Gross premiums written by way of direct business of insurance relate to individual
business and group contracts. All long term contracts of insurance are concluded in or
from Malta.
(ii)Reinsurance balance
The reinsurance balance, which represents the aggregate of all items relating to
reinsurance outwards mainly attributable to insurance contracts included in the long-
term business technical account are as follows:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Charge for reinsurance outwards | 2,476 | 1,049 | 225 | 202

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
131
6. Segment information - continued
Long term business - continued
(iii)Analysis between insurance and investment contracts

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Gross premium written |  |  |  |
| Insurance contracts | 32,047 | 33,245 | 2,680 | 2,497
| Investment contracts with DPF | 219,392 | 294,387 | — | —
|  | 251,439 | 327,632 | 2,680 | 2,497
| Claims incurred, net of reinsurance |  |  |  |
| Insurance contracts | 51,945 | 56,877 | 596 | 1,098
| Investment contracts with DPF | 243,616 | 249,191 | — | —
|  | 295,561 | 306,068 | 596 | 1,098

Reconciliation of reportable segment profit to profit or loss for the financial year
before tax

|  | Group
|  | 2022 | 2021
|  | € | €
| Profit on general business | 4,763 | 5,260
| Profit on long term business | 18,569 | 19,012
| Net investment income not allocated to technical accounts | 4 | (26)
| Revaluation loss on freehold land and buildings | — | (1,521)
| Other income | 1,135 | 1,438
| Administrative expenses | (2,829) | (3,773)
| Recovery of impairment in group undertaking | 540 | —
| Profit for the financial year before tax | 22,182 | 20,390

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
132
6.Segment information - continued
Reconciliation of reportable segment profit to profit or loss for the financial year
before tax - continued

|  | Company
|  | 2022 | 2021
|  | € | €
| Profit on general business | 4,763 | 5,260
| Profit on long term business | 1,321 | 916
| Net investment income | 1,313 | 141
| Administrative expenses | (1,946) | (2,254)
| Recovery of impairment in group undertaking | 540 | —
| Profit for the financial year before tax | 5,991 | 4,063

Geographical information
The segment results for the years ended 31 December 2022 and 2021 by geographical
area are indicated below:

|  | Group Gross premiums written | Company Gross premiums written
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Continuing operations |  |  |  |
| Malta | 335,878 | 405,245 | 87,119 | 80,110

Group segment assets and liabilities
The Group operates a business model which does not allocate either assets or liabilities
of the operating segments in its internal reporting. Segment assets below consist
principally of investments backing up the net technical provisions.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
133
6.S egment information - continued
Group segment assets and liabilities - continued

|  | Motor third Party | Motor other | Fire and other damage to property | Accident and health | Other classes | Long- term business | Unallocated | Total
|  | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000
| At 31 December 2022 |  |  |  |  |  |  |  |
| Assets allocated to business segments | 45,253 | 15,638 | 15,380 | 12,121 | 15,773 | 2,065,369 | 17,422 | 2,186,956
| Assets allocated to shareholders | — | — | — | — | — | — | 283,232 | 283,232
| Total assets | 45,253 | 15,638 | 15,380 | 12,121 | 15,773 | 2,065,369 | 300,654 | 2,470,188
| At 31 December 2021 |  |  |  |  |  |  |  |
| Assets allocated to business segments | 43,786 | 14,887 | 14,929 | 10,802 | 15,742 | 2,439,816 | 16,562 | 2,556,524
| Assets allocated to shareholders | — | — | — | — | — | — | 275,229 | 275,229
| Total assets | 43,786 | 14,887 | 14,929 | 10,802 | 15,742 | 2,439,816 | 291,791 | 2,831,753

The total of non-current assets, other than financial instruments, deferred tax assets and
risks arising under insurance contracts of €235.35 million (2021: €239.20 million) are
all located in Malta.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
134
7.Net operating expenses

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | € | € | € | €
| Acquisition costs | 35,964 | 34,695 | 24,177 | 21,709
| Change in deferred acquisition costs, net of reinsurance | (845) | 212 | (845) | 212
| Administrative expenses | 13,789 | 13,143 | 6,830 | 6,204
| Reinsurance commissions and profit participation | (4,961) | (4,827) | (4,928) | (4,665)
|  | 43,947 | 43,223 | 25,234 | 23,460
| Allocated to: |  |  |  |
| General business | 22,867 | 20,878 | 22,867 | 20,878
| Long term business | 18,251 | 18,572 | 421 | 328
| Non-technical account (administrative expenses) | 2,829 | 3,773 | 1,946 | 2,254
|  | 43,947 | 43,223 | 25,234 | 23,460

Total commissions for direct business accounted for in the financial year amounted to
€23.11 million (2021: €23.51 million) in the Group’s technical result and €16.51
million (2021: €15.36 million) in the Company’s technical result. €6.03 million (2021:
€7.45 million) of the Group charge arose on investment contracts. Administrative
expenses mainly comprise employee benefit expenses which are analysed in Note 11.
Further detail relating to administrative expenses is included in Note 10.
Non-technical account
Administrative expenses in the non-technical profit or loss account represent
expenditure after appropriate apportionments are made to the general and long term
business technical accounts. They include staff costs, premises costs, depreciation
charge, directors’ fees, auditors’ remuneration, professional fees, marketing and
promotional costs, and other general office expenditure.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
135
8.Investment return

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | € | € | € | €
| Investment income |  |  |  |
| Dividend income from group undertakings | — | — | 1,313 | 141
| Share of profit of other associated undertaking, net of tax | 95 | 89 | — | —
| Rent receivable from investment property | 6,196 | 5,835 | 776 | 717
| Interest receivable from loans and receivables |  |  |  |
| - other financial assets not at fair value | 1,427 | 1,893 | — | —
| Income from financial assets at |  |  |  |
| - dividend income | 10,780 | 9,572 | 33 | 7
| - net fair value gains and interest on bonds | — | 90,006 | — | —
| Income from available-for-sale assets |  |  |  |
| - dividend income | — | 26 | — | 26
| - net fair value gains and interest on bonds | 55 | 187 | 55 | 187
| Net fair value gains on investment property | — | — | — | —
| Other investment income | 996 | 595 | 5 | —
| Exchange differences | 2 | 17 | 2 | 17
|  | 19,551 | 108,220 | 2,184 | 1,095

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
136
8.Investment return - continued

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Investment expenses and charges |  |  |  |
| Direct operating expenses arising from investment property that generated rental income | 342 | 385 | 13 | 15
| Interest expense on loans and receivables | 27 | 66 | 27 | 66
| Interest expense for financial liabilities that are not at fair value through profit or loss | 7 | 3 | 7 | 3
| Expense on financial assets at fair value through profit or loss |  |  |  |
| - net fair value losses and interest on bonds | 296,097 | 51 | 333 | 51
| Net fair value losses on investment property | 3,011 | 3,113 | 642 | 473
| Other investments expenses | 6,797 | 6,815 | 18 | 2
| Interest on lease liabilities | 51 | 48 | 51 | 48
|  | 306,332 | 10,481 | 1,091 | 658
| Net investment return | (286,781) | 97,739 | 1,093 | 437
| Analysed between: |  |  |  |
| Allocated investment return transferred to the general business technical account | (171) | 307 | (171) | 307
| Investment return included in the long term business technical account | (286,614) | 97,458 | (49) | (11)
| Other investment income included in the non-technical account | 4 | (26) | 1,313 | 141
|  | (286,781) | 97,739 | 1,093 | 437

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
137
9. Other income

|  | Group
|  | 2022 | 2021
|  | €'000 | €'000
| Other technical income, net of reinsurance |  |
| Investment management fees | 688 | 724
| Other | 55 | 64
|  | 743 | 788
| Other income - non technical |  |
| Management fees | 603 | 655
| Other income | 532 | 783
|  | 1,135 | 1,438

10.Profit before tax
The profit before tax is stated after charging/(crediting):

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Employee compensation (Note 11) | 13,709 | 12,649 | 7,553 | 7,784
| Depreciation/amortisation: |  |  |  |
| - intangible assets (Note 16) | 2,575 | 2,207 | 1,973 | 1,523
| - property, plant and equipment (Note 18) | 1,071 | 855 | 579 | 518
| Release of provision for impairment on receivables (Note 26) | (135) | (106) | (135) | (106)
| Impairment of receivables | 29 | 9 | 29 | 9
| Increase in provision for impairment on receivables (Note 26) | 188 | 160 | 188 | 160

The financial statements include fees, exclusive of VAT, charged by the Company's
auditors for services rendered during the financial years ended 31 December 2022 and
2021, relating to entities that are included in the consolidation amounting to:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
138
10.Profit before tax - continued

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Annual statutory audit | 599 | 310 | 271 | 149
| Solvency II audit | 105 | 103 | 45 | 44
| Non-audit services | 2 | 1 | — | —

| Paid during the year: |  |  |  |
| for financial year 2022 | 296 | — | 136 | —
| for financial year 2021 | 276 | 143 | 127 | 70
| for financial year 2020 | — | 319 | — | 160

11. Employee compensation

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Salaries | 12,908 | 12,001 | 7,098 | 7,366
| Social security costs | 667 | 648 | 395 | 418
| Contributions to Employee Voluntary Occupational Pension Scheme | 134 | — | 60 | —
|  | 13,709 | 12,649 | 7,553 | 7,784

The average number of persons employed during the year was:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Key management personnel | 27 | 26 | 14 | 14
| Managerial | 41 | 42 | 19 | 20
| Technical | 213 | 208 | 139 | 148
| Administrative | 9 | 9 | 5 | 5
|  | 290 | 285 | 177 | 187

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
139
12. Tax expense

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Current tax expense | 44,722 | 2,311 | 1,888 | 1,645
| Deferred tax expense (Note 23) | (37,183) | 5,156 | 313 | (190)
| Income tax expense | 7,539 | 7,467 | 2,201 | 1,455

The tax on the Group’s and Company’s profit before tax differs from the theoretical
amount that would arise using the basic tax rate as follows:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Profit before tax | 22,182 | 20,390 | 5,991 | 4,063
| Tax at 35% | 7,764 | 7,137 | 2,097 | 1,422
| Adjusted for tax effect of : |  |  |  |
| Net exempt income and disallowed expenses | (17) | 49 | 306 | 47
| Property withholding tax at 8% or10% | (97) | 476 | 170 | 115
| Other | (111) | (195) | (372) | (129)
| Income tax expense | 7,539 | 7,467 | 2,201 | 1,455

13. Directors’ emoluments

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €'000 | €'000 | €'000 | €'000
| Directors' fees | 307 | 289 | 224 | 271

Group Directors’ fees include fees payable to the Company’s directors both from the
Company and from other Group Companies where applicable.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
140
14.Earnings per share
Earnings per share are based on the net profit for the year divided by the weighted
average number of ordinary shares in issue during the year.

|  | Group
|  | 2022 | 2021
|  | €'000 | €'000
| Profit attributable to owners of the Company | 8,794 | 7,643
| Number of ordinary shares |  |
| in issue (Note 28) | 92,000 | 92,000
| Basic and diluted earnings per share attributable to owners of the Company (€) | 0.096 | 0.083

15.Dividends
A final gross dividend in respect of year ended 31 December 2022 of €0.054617
(2021: €0.030401) per share amounting to a total dividend of €5,024,817 (2021:
€2,796,910) is to be proposed by the directors at the forthcoming annual general
meeting. This is equivalent to a net dividend of €0.038043 (2021: €0.026087) per
share amounting to a total net dividend of €3,500,000 (2021: €2,400,000).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
141
16.Intangible assets

| Group |  |  |  |  |
|  | Valuation in-force business (i) | Computer Software | Deferred Acquisition cost (ii) | Total |
|  | €'000's | €'000's | €'000's | €'000's |
| At 1 January 2021 |  |  |  |  |
| Cost or valuation | 77,192 | 36,694 | 3,642 | 117,528 |
| Accumulated amortisation and impairment | — | (19,311) | (3,381) | (22,692) |
| Net book amount | 77,192 | 17,383 | 261 | 94,836 |
| Year ended 31 December 2021 |  |  |  |  |
| Opening net book amount | 77,192 | 17,383 | 261 | 94,836 |
| Increase in value of in force business credited to reserves | 9,912 | — | — | 9,912 |
| Additions | — | 7,111 | 77 | 7,188 |
| Amortisation charge | — | (2,034) | (173) | (2,207) |
| Closing net book amount | 87,104 | 22,460 | 165 | 109,729 |
| At 31 December 2021 |  |  |  |  |
| Cost or valuation | 87,104 | 43,805 | 3,719 | 134,628 |
| Accumulated amortisation and impairment | — | (21,345) | (3,554) | (24,899) |
| Net book amount | 87,104 | 22,460 | 165 | 109,729 |
| Year ended 31 December 2022 |  |  |  |  |
| Opening net book amount | 87,104 | 22,460 | 165 | 109,729 |
| Decrease in value of in-force business debited to reserves | (7,266) | — | — | (7,266) |
| Additions | — | 7,946 | 155 | 8,101 |
| Disposals | — | (2) | — | (2) |
| Amortisation charge | — | (2,563) | (12) | (2,575) |
| Closing net book amount | 79,838 | 27,841 | 308 | 107,987 |
| At 31 December 2022 |  |  |  |  |
| Cost or valuation | 79,838 | 51,749 | 3,874 | 135,461 |
| Accumulated amortisation and impairment | — | (23,908) | (3,566) | (27,474) |
| Net book amount | 79,838 | 27,841 | 308 | 107,987 |

(i) Value of in-force business - assumptions, changes in assumptions and sensitivity
(ii) This intangible asset relates to investment contracts without DPF only.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
142
16.Intangible assets - continued
Amortisation of €0.24 million (2021: €0.38 million) is included in acquisition costs and
€2.34 million (2021: €1.83 million) is included in administrative expenses.
The after tax value of in-force business is determined by the directors on an annual
basis. The embedded value and expected future profits of each line of business is
assessed.
The value of in-force business is calculated using a large number of assumptions about
future experience. These assumptions concern both future economic and demographic
experience. Forecasting future experience is inherently difficult.
The Group seeks to set assumptions that are consistent with the actual experience of the
business. As a result, the assumptions used in the assessment are revised, at least
annually, to be up to date. The process by which assumptions are changed is described
in more detail below.
The value of with-profits business is most sensitive to the size of the with-profits fund.
A 1% increase in the size of the fund value will increase the embedded value reported
by €0.58 million. A 1% fall in the size of the fund value will reduce the embedded
value reported by €0.61 million.
Similarly, the value of unit-linked business is most sensitive to the size of the unit-
linked fund. A 1% increase in the size of the fund value will increase the embedded
value by €0.14 million. A 1% fall in the size of the fund value will reduce the
embedded value by €0.15 million.
Term assurance business is particularly sensitive to the rates assumed for future
mortality. A 1 percentage point increase in the rates will reduce the embedded value by
€0.29 million, while a 1 percentage point decrease in the rate will increase the
embedded value by €0.29 million.
The economic assumptions used in the calculation have been set to be internally
consistent as well as reflecting the directors’ view of economic conditions in the longer
term. For the current year, short term (2023-2025) inflation assumptions have been
adjusted in line with the Central Bank of Malta outlook. The valuation assumed a long
term real return of 1.4% pa (2021: 1.0% pa) for with-profits business with a risk
discount rate of 4.5% pa (2021: 4.0% pa). For term assurance business the valuation
assumed a real return of 0.15% (2021: -0.5% pa) with a risk discount rate of 5.25% pa
(2021: 4.5% pa). For unit-linked business the valuation assumed a real return of -0.35%
(2021: -1% pa) with a risk discount rate of 5.25% pa (2021: 4.5% pa). Expenses are
assumed to inflate at 2.1% pa (2021: 2.0% pa).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
143
16.Intangible assets - continued
As noted, economic assumptions are set to be internally consistent and reflect the real
long-term returns anticipated and the risk appetite of the Directors. To maintain this
internal consistency, any changes to the economic assumptions are considered as a
whole. We consider that any changes to the assumptions that do not change the internal
consistency will not significantly change the value of the in-force business.
Demographic assumptions are reviewed on an annual basis to reflect the development
of experience and to improve on the reliability of the estimation process. This year the
prudent rates of expected future mortality have been revised across all product lines.
Future mortality assumptions continue to be set with reference to standard mortality
tables and vary with the age of the policyholder.
Future lapse/surrender assumptions continue to be set as a function of the product type,
the premium frequency, and the duration a policy has been in force. Assumptions
about the servicing costs of in-force policies are also made in line with the current,
aggregate renewal costs as reflected in profit or loss.
Lapse and policy assumptions were also updated in line with past experience and future
expectations.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
144
16.Intangible assets - continued

| Company | Computer Software
|  | €'000
| At 1 January 2021 |
| Cost | 15,331
| Accumulated amortisation | (7,569)
| Net book amount | 7,762
| Year ended 31 December 2021 |
| Opening net book amount | 7,762
| Additions | 2,907
| Amortisation charge | (1,523)
| Closing net book amount | 9,146
| At 31 December 2021 |
| Cost | 18,238
| Accumulated amortisation | (9,092)
| Net book amount | 9,146
| Year ended 31 December 2022 |
| Opening net book amount | 9,146
| Additions | 2,794
| Amortisation charge | (1,973)
| Closing net book amount | 9,967
| At 31 December 2022 |
| Cost | 21,032
| Accumulated amortisation | (11,065)
| Net book amount | 9,967

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
145
16.Intangible assets - continued
No amortisation (2021: nil) is included in acquisition costs and €1.97 million (2021:
€1.52 million) is included in administrative expenses.
Computer software mainly represents amounts capitalised relating to the development
of the Group and Company’s IT system by related companies forming part of the
MAPFRE S.A. Group.
17. Leases
(a)Leases as the lessee
The Group leases property and motor vehicles. Property leases generally run for a
period of five to seven years without the option to renew, whilst motor vehicle leases
typically run for a period of seven years. Lease payments are subsequently renegotiated
to reflect market rates.
i.Right-of-use assets
Right-of-use assets related to leased motor vehicles and properties that do not meet the
definition of investment property are presented as a separate line item on the face of the
Statement of Financial Position.

| 2021 | Group
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Balance on 01 January | 341 | 590 | 931
| Additions | 1,036 | 208 | 1,244
| Derecognition of right-of-use assets | — | (45) | (45)
| Depreciation charge for the year | (173) | (155) | (328)
| Balance on 31 December | 1,204 | 598 | 1,802

2022 | Group
| Property | Motor vehicles | Total
| €’000 | €’000 | €’000
Balance on 01 January | 1,204 | 598 | 1,802
Additions | — | — | —
Derecognition of right-of-use assets | — | (46) | (46)
Depreciation charge for the year | (212) | (129) | (341)
Depreciation released on derecognition | — | 46 | 46
Balance on 31 December | 992 | 469 | 1,461

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
146
17. Leases - continued
(a)Leases as the lessee - continued
i.Right-of-use assets - continued

| 2021 | Company
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Balance on 01 January | 341 | 425 | 766
| Additions | 1,036 | 153 | 1,189
| Depreciation charge for the year | (173) | (97) | (270)
| Balance on 31 December | 1,204 | 481 | 1,685

| 2022 | Company
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Balance on 01 January | 1,204 | 481 | 1,685
| Depreciation charge for the year | (212) | (95) | (307)
| Balance on 31 December | 992 | 386 | 1,378

ii.Amounts recognised in profit or loss

| 2021 | Group
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Depreciation of right-of-use assets | 173 | 155 | 328
| Interest expense on lease liabilities | 21 | 35 | 56

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
147
17. Leases - continued
(a)Leases as the lessee - continued
ii.Amounts recognised in profit or loss - continued

| 2022 | Group
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Depreciation of right-of-use assets | 212 | 129 | 341
| Interest expense on lease liabilities | 27 | 28 | 55

| 2021 | Company
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Depreciation of right-of-use assets | 173 | 97 | 270
| Interest expense on lease liabilities | 21 | 27 | 48

| 2022 | Company
|  | Property | Motor vehicles | Total
|  | €’000 | €’000 | €’000
| Depreciation of right-of-use assets | 212 | 95 | 307
| Interest expense on lease liabilities | 27 | 24 | 51

In 2022, the Company recognised €28,119 (2021: €36,658), relating to short term
leases, as lease expense in the statement of profit or loss and other comprehensive
income.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
148
17. Leases - continued
(b) Leases as the lessor
The Group and the Company lease out certain property. Note 19 sets out information
about investment property. The Group has classified these leases as operating leases
because they do not transfer substantially all the risks and rewards incidental to the
ownership of the assets.
The following table sets out a maturity analysis of lease payments receivable, showing
the undiscounted lease payments to be received after the reporting date.
Operating leases

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Less than one year | 5,530 | 4,969 | 654 | 541
| One to two years | 4,309 | 3,388 | 510 | 295
| Two to three years | 3,229 | 2,676 | 314 | 236
| Three to four years | 1,578 | 2,268 | 274 | 225
| Four to five years | 1,217 | 858 | 38 | 232
| More than five years | 3,726 | 2,434 | — | 38
| Total | 19,589 | 16,593 | 1,790 | 1,567

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
149
18.Property, plant and equipment
Group

|  | Freehold |  | Furniture |
|  | land and | Leasehold | fittings and |
|  | buildings | improvements | equipment | Total
|  | €’000 | €’000 | €’000 | €'000
| At 1 January 2021 |  |  |  |
| Cost | 14,423 | 3,373 | 7,837 | 25,633
| Accumulated depreciation | (147) | (1,933) | (5,640) | (7,720)
| Closing net book amount | 14,276 | 1,440 | 2,197 | 17,913
| Year ended 31 December 2021 |  |  |  |
| Opening net book amount | 14,276 | 1,440 | 2,197 | 17,913
| Additions | 218 | 270 | 551 | 1,039
| Revaluation gain to other comprehensive income | 1,081 | — | — | 1,081
| Revaluation loss to profit or loss | (1,521) | — | — | (1,521)
| Depreciation charge | (24) | (219) | (612) | (855)
| Closing net book amount | 14,030 | 1,491 | 2,136 | 17,657
| At 31 December 2021 |  |  |  |
| Cost | 14,201 | 3,643 | 8,388 | 26,232
| Accumulated depreciation | (171) | (2,152) | (6,252) | (8,575)
| Net book amount | 14,030 | 1,491 | 2,136 | 17,657

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
150
18.Property, plant and equipment - continued
Group - continued

|  | Freehold |  | Furniture |
|  | land and | Leasehold | fittings and |
|  | buildings | improvements | equipment | Total
|  | €’000 | €’000 | €’000 | €’000
| Year ended 31 December 2022 |  |  |  |
| Opening net book amount | 14,030 | 1,491 | 2,136 | 17,657
| Additions | 156 | 580 | 754 | 1,490
| Amount transferred to investment property (Note 19) | (457) | — | — | (457)
| Depreciation charge | (89) | (238) | (744) | (1,071)
| Depreciation on amount transferred to investment property (Note 19) | 7 | — | — | 7
| Closing net book amount | 13,647 | 1,833 | 2,146 | 17,626
| At 31 December 2022 |  |  |  |
| Cost | 13,900 | 4,223 | 9,142 | 27,265
| Accumulated depreciation | (253) | (2,390) | (6,996) | (9,639)
| Net book amount | 13,647 | 1,833 | 2,146 | 17,626

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
151
18.Property, plant and equipment - continued
Company

|  | Freehold |  | Furniture |
|  | land and | Leasehold | fittings and |
|  | buildings | improvements | equipment | Total
|  | €'000 | €'000 | €'000 | €'000
| At 1 January 2021 |  |  |  |
| Cost | — | 2,787 | 2,999 | 5,786
| Accumulated depreciation | — | (1,410) | (2,124) | (3,534)
| Net book amount | — | 1,377 | 875 | 2,252
| Year ended 31 December 2021 |  |  |  |
| Opening net book amount | — | 1,377 | 875 | 2,252
| Transfer from investment property (Note 19) | 2,191 | — | — | 2,191
| Additions | — | 269 | 348 | 617
| Depreciation charge | (18) | (187) | (313) | (518)
| Closing net book amount | 2,173 | 1,459 | 910 | 4,542
| At 31 December 2021 |  |  |  |
| Cost | 2,191 | 3,056 | 3,347 | 8,594
| Accumulated depreciation | (18) | (1,597) | (2,437) | (4,052)
| Net book amount | 2,173 | 1,459 | 910 | 4,542

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
152
18.Property, plant and equipment - continued

| Company - continued |  |  |  |
|  | Freehold |  | Furniture |
|  | land and | Leasehold | fittings and |
|  | buildings | improvements | equipment | Total
|  | €’000 | €’000 | €’000 | €’000
| Year ended 31 December 2022 |  |  |  |
| Opening net book amount | 2,173 | 1,459 | 910 | 4,542
| Transfer to investment property (Note 19) | (457) | — | — | (457)
| Additions | — | 579 | 388 | 967
| Depreciation charge | (21) | (212) | (346) | (579)
| Depreciation released on transfer to investment property (Note 19) | 7 | — | — | 7
| Closing net book amount | 1,702 | 1,826 | 952 | 4,480
| At 31 December 2022 |  |  |  |
| Cost or valuation | 1,734 | 3,635 | 3,735 | 9,104
| Accumulated depreciation | (32) | (1,809) | (2,783) | (4,624)
| Net book amount | 1,702 | 1,826 | 952 | 4,480

Freehold land and buildings transferred from investment property are transferred at the
fair value at the point of transfer and are subsequently depreciated. Transfers to
investment property are made at the depreciated value at the point of transfer. If the fair
value of the freehold land and buildings is significantly different as compared to its
carrying amount then a revaluation adjustment is recorded.
Depreciation charge has been included in administrative expenses.
The Group’s and Company’s Land and buildings are shown at fair value (level 3).
A valuation of land and buildings was carried out by external qualified valuers during
2021. The fair value movements were debited to profit or loss. The carrying amount of
land and buildings that would have been included in the financial statements had these
assets been carried at cost less accumulated depreciation for the Group is €12.2 million
(2021: €13.7 million) and for the Company €0.8 million (2021: €1.1 million).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
153
18. Property, plant and equipment - continued
Valuation processes
Periodically, the Group engages qualified valuers to determine the fair value of the
Group’s land and buildings. As at 31 December 2021, the fair value of the land and
buildings has been determined by PwC Malta. The Company’s land and buildings was
also revalued by PwC Malta in 2022 with no significant change to the carrying amount.
No valuation has been performed in 2022 on the land and building of the subsidiary.
Whenever a valuation is carried out the finance department:
•verifies all major inputs to the valuation report prepared by the qualified valuer;
•assesses property valuation movements when compared to the prior valuation
report; and
•holds discussions with the qualified valuer.
Valuation techniques
The fair value of the Group’s and the Company’s land and buildings, with a total
carrying amount of €13.6 million and €1.7 million respectively (2021: €14.0 million
and €2.2 million respectively), was determined by capitalizing future net income
streams based on significant unobservable inputs. These inputs include:

Valuation technique | Significant unobservable inputs for 2021 | Inter-relationship between key unobservable inputs and fair value measurement
Discounted cash flows: The valuation model considers the present value of net cash flows potentially generated from the property, taking into account the expected rental growth rate, void periods and costs not paid for by the tenants. The expected net cash flows are discounted using the risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), lease terms, property risk premium and inflation. | –Risk-adjusted discount rate varying between 6.2% & 6.8%. –The valuation provides for a void factor varying between 2.5% & 6.7% on rental income. –A benchmark lease market rate was applied once current lease terms expired. –Expected market rental growth rate of 1.6% in line with the implied inflation rate IRR (Internal Rate of Return). | The estimated fair value would increase/(decrease) if: –The risk-adjusted discount rate were lower/(higher); –Void factor were lower/(higher) –The market rate were higher/(lower); –Expected market rental growth were higher/(lower).

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
154
18. Property, plant and equipment - continued
Valuation techniques - continued
Although the properties are currently being used by MMS as its Floriana Regional
Office and MMSV as its head office, for the purpose of the valuation, it was assumed
that the property’s highest and best use would be rental to a third party, assuming same
use. Although the Market Approach was considered, its applicability is limited, due to
the illiquidity of the commercial property market in Malta and therefore, the limited
number of transactions available. Moreover, it is inherently difficult to find
transactions including office blocks that are directly comparable to the property.
19.Investment property

| Group | Company
| €’000 | €’000
At 1 January 2021 |  |
Cost | 63,301 | 8,047
Accumulated fair value gains | 48,217 | 8,158
Net book amount | 111,518 | 16,205
Year ended 31 December 2021 |  |
Opening net book amount | 111,518 | 16,205
Transfer to property, plant & equipment (Note 18) | — | (2,191)
Additions | 1,627 | 4
Disposals | (16) | (16)
Net fair value losses | (3,113) | (473)
Net book amount | 110,016 | 13,529
At 31 December 2021 |  |
Cost | 65,116 | 7,022
Accumulated fair value gains | 44,900 | 6,507
Net book amount | 110,016 | 13,529

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
155
19.Investment property - continued

|  | Group | Company
|  | €’000 | €’000
| Year ended 31 December 2022 |  |
| Opening net book amount | 110,016 | 13,529
| Transfer from property, plant & equipment (Note 18) | 450 | 450
| Additions | 936 | 76
| Disposals | (90) | (7)
| Net fair value losses | (3,034) | (644)
| Net book amount | 108,278 | 13,404
| At 31 December 2022 |  |
| Cost | 66,412 | 7,541
| Accumulated fair value gains | 41,866 | 5,863
| Net book amount | 108,278 | 13,404

Transfers to or from property, plant & equipment and disposals are inclusive of
accumulated fair value gains at the point of transfer.
Fair value of land and buildings
A valuation of the Group’s and Company’s land and buildings was performed by
external qualified valuers to determine the fair value of the land and buildings as at 31
December 2022 and 2021. The fair value movements were credited to profit or loss and
are presented within ‘investment return’ (Note 8).
The Group’s and the Company’s investment property, comprising mainly office
buildings, have been determined to fall within level 3 of the fair valuation hierarchy.
The different levels in the fair value hierarchy have been defined in Note 4.3.
The Group’s and the Company’s policy is to recognise transfers into and out of fair
value hierarchy levels as of the date of the event or change in circumstances that caused
the transfer. There were no transfers between levels during the year.
Valuation processes
On an annual basis, the Group and Company engage external, independent property
valuers, having appropriate recognized professional qualifications and recent
experience in the location and category of the properties being valued to determine the
fair value of the land and buildings. As at 31 December 2022, the fair values of the land
and buildings have been determined by PwC Malta and DHI Periti.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
156
19.Investment property - continued
Valuation processes - continued
At each financial year end the investments department:
•verifies all major inputs to the valuation report prepared by the qualified valuer;
•assesses property valuation movements when compared to the prior year valuation
report; and
•holds discussions with the qualified valuer.
The valuation techniques used for investment properties were the discounted cash flow
valuation and comparative methods so as to provide accuracy and consistency in
arriving at a fair value that reflects a price that would be reasonably expected to be
received in an orderly transaction between market participants at the measurement date.
Valuation technique - Discounted cash flow
The following tables shows the valuation technique used in measuring the fair value of
investment property using the discounted cash flow technique, as well as the significant
unobservable inputs used. These inputs include:
Group

| Valuation technique | Significant unobservable inputs | Inter-relationship between key unobservable inputs and fair value measurement
| Discounted cash flows: The valuation model considers the present value of net cash flows generated from the property, taking into account the expected rental growth rate, void periods and costs not paid for by the tenants. The expected net cash flows are discounted using the risk- adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), lease terms, property risk premium and inflation. | –Risk-adjusted discount rate varying between 5.7% and 8.1% (2021: 4.9% and 8.0% %). –A void factor varying between 1.5% to 6.5% (2021: 1.9% and 6.7%) on rental income. –Lease market rate was applied once current lease terms expired. –Expected market rental growth rate of 2.0% (2021: 1.6%) in line with the general inflation rate –Construction costs for undeveloped airspace and re-developable land varying between €656/sqm and €1,535/sqm (2021: €725/ sqm and €1,349/sqm) | The estimated fair value would increase/(decrease) if: –The risk-adjusted discount rate were lower/ (higher); –Void factor were lower/ (higher); –The market rate were higher/(lower); –Expected market rental growth were higher/ (lower). –Constructions costs were lower/(higher).

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
157
19. Investment property - continued
Valuation technique - Discounted cash flow - continued
Company

| Valuation technique | Significant unobservable inputs | Inter-relationship between key unobservable inputs and fair value measurement
| Discounted cash flows: The valuation model considers the present value of net cash flows generated from the property, taking into account the expected rental growth rate, void periods and costs not paid for by the tenants. The expected net cash flows are discounted using the risk- adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), lease terms, property risk premium and inflation. | –Risk-adjusted discount rate varying between 7.1% and 7.9% (2021: 6.2%). –A void factor of 4.5% (2021: 6.7%) on rental income. –Lease market rate was applied once current lease terms expired. –Expected market rental growth rate of 2.0% (2021: 1.6%) in line with general inflation rate. | The estimated fair value would increase/(decrease) if: –The risk-adjusted discount rate were lower/(higher); –Void factor were lower/ (higher); –The market rate were higher/(lower); –Expected market rental growth were higher/ (lower).

The fair value of investment property determined by external, qualified property
valuers on the basis of the discounted cash flow method amounted to €103.64 million
(2021: €105.68 million) for the Group and €12.13 million (2021: €12.51 million) for
the Company.
In 2021 the Company transferred a portion of Investment Property having a value of
€2.19 million to Property, plant and equipment for own use. During 2022 the Company
transferred back Property, plant and equipment having a value of €0.45 million to
Investment Property.
Valuation technique – Residual value
One property held by the Group situated within the Grand Harbour Local Plan has been
valued using the Residual Method, a technique typically applied in valuations of
development properties and existing properties that have a potential to be redeveloped.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
158
19. Investment property - continued
Valuation technique – Residual value - continued

| Valuation technique | Significant unobservable inputs | Inter-relationship between key unobservable inputs and fair value measurement
| Residual method: The valuation model comprises: (a) the estimation of the gross development value of the property in a redeveloped form by applying the investment method (income approach), on the basis of potential developed area on completion and a market rent (net of non-recoverable expenses) per square metre (sq.m.), capitalised using an equivalent yield; and deducting (b) estimated development costs incurred in relation to the demolition of existing buildings, design costs, infrastructure works, construction costs, professional fees and costs of letting and sale; and (c) a ‘developer’s profit’ representing an allowance for the risk of undertaking the development. | – Offices net internal area on completion 7,130 sq.m. –Annual net rental rate per sq.m. of office space €141 (2021: €137) –Number of car spaces on completion 159 (2021:149) –Annual net rental rate per car space €816 (2021:€813) –Capitalisation rate 6.4% (2021: 6.8%) –Net development costs €10.0m (2021: €8.9m) –Developer’s profit 15% (2021:15%) –Planning uncertainty discount 10% (2021:10%) | The estimated fair value would increase/(decrease) if: –Offices net internal area on completion were higher/ (lower); –Annual net rental rate per sqm of office space were higher/(lower); –Number of car spaces on completion were higher/ (lower); –Net rental rate per car space were higher/(lower); –Capitalisation rate were lower/ (higher); –Net development costs were lower/(higher); –Developer’s profit were lower/(higher); and –Planning uncertainty discount were lower/ (higher).

The fair value of investment property determined by external, qualified property
valuers on the basis of residual method amounted to €2.67 million (2021: €2.62
million) for the Group.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
159
19. Investment property - continued
Valuation technique - Comparative transactions method
The fair value of the Group’s investment properties determined on the basis of the
market comparison method amounted to €0.7 million in 2022 and 2021. The
comparative method is based on an expected sales value per square metre based on an
average/ median of values derived from observable market transactions for comparable
properties.
Valuation technique - Income Capitalisation Method
The valuation for all other investment property with a total carrying amount of €1.27
million (2021: €1.0 million) for the Group and Company, was determined by
capitalising future net income streams based on significant unobservable inputs. These
inputs include:

| Future rental cash inflows | based on the actual location, type and quality of the properties and supported by the terms of any existing lease, other contracts or external evidence such as current market rents for similar properties;
| Capitalisation rates | based on actual location, size and quality of the properties and taking into account market data at the valuation date.

Information about fair value measurements using significant unobservable inputs (level
3)
Group & Company

|  |  |  | Significant unobservable
|  | Fair value at 31 December |  | Inputs
|  | 2022 | Valuation | Rental | Capitalisation
|  | € | technique | value | rate
| Description |  |  | € | %
| Office buildings | 1.27m | Capitalisation of | 0.05m | 3.50 – 5.00
|  |  | future net income |  |
|  |  | streams |  |

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
160
19.Investment property - continued
Information about fair value measurements using significant unobservable inputs (level
3) - continued
Group & Company

|  |  |  | Significant unobservable
|  | Fair value at 31 December |  | Inputs
|  | 2021 | Valuation | Rental | Capitalisation
|  | € | technique | value | rate
| Description |  |  | € | %
| Office buildings | 1.00m | Capitalisation of | 0.04m | 4.25 – 5.00
|  |  | future net income |  |
|  |  | streams |  |

For each valuation for which rental value and capitalisation rate have been determined
to be the significant unobservable inputs, the higher the rental value and the lower the
capitalisation rate, the higher the fair value. Conversely, the lower the rental value and
the higher the capitalisation rate, the lower the fair value.
In the absence of future rental cash inflows, fair value is based on active market prices,
adjusted, if necessary for any difference in the nature, location or condition of the
specific asset.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
161
19.Investment property - continued
Sensitivity analysis
Sensitivity analysis was carried out to assess the impact of changing the risk-adjusted
discount rate (0.5 percentage point increase/decrease), or the market rental rate growth
(5.0 percentage point increase/decrease) in the case of the discounted cash flow or
residual method, and the capitalisation rate for the income capitalisation method. The
tables below show the changes in the valuation arising from such changes:
Group

| 2022 | 2022 | 2021 | 2021
| -0.5% | +0.5% | -0.5% | +0.5%
| € million | € million | € million | € million
Discount rates | 9.3 | (8.0) | 9.6 | (8.2)
| 2022 | 2022 | 2021 | 2021
| -5% | +5% | -5% | +5%
| € million | € million | € million | € million
Market rates | (5.4) | 5.3 | (6.0) | 6.0

Company

| 2022 | 2022 | 2021 | 2021
| -0.5% | +0.5% | -0.5% | +0.5%
| € million | € million | € million | € million
Discount rates | 1.1 | (0.9) | 1.0 | (0.9)
| 2022 | 2022 | 2021 | 2021
| -5% | +5% | -5% | +5%
| € million | € million | € million | € million
Market rates | (0.5) | 0.5 | (0.5) | 0.5

The impact on profit or loss would be a maximum increase of €1.1 million (2021: €1.1
million) or a maximum decrease of €1.1 million (2021: €1.1 million) for the Group and
a maximum increase of €1.1 million (2021: €1.0 million) or a maximum decrease of
€0.9 million (2021: €0.9 million) for the Company.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
162
20.Investment in subsidiary undertakings

|  | Company
|  | €’000
| Year ended 31 December 2022 |
| Opening and closing net book amount | 77,214
| Closing net book amount | 77,214
| Year ended 31 December 2021 |
| Opening net book amount | 57,214
| Additions | 20,000
| Closing net book amount | 77,214

The subsidiary undertakings at 31 December are shown below:

| Subsidiary undertakings | Registered office | Class of shares held | Percentage of shares held
|  |  |  | 2022 | 2021
| Euro Globe Holdings Limited (Company in liquidation) | Middle Sea House Floriana | Ordinary shares | 100% | 100%
| Euromed Risk Solutions Limited | Development House Floriana | Ordinary shares | 100% | 100%
| Bee Insurance Management Limited | Development House Floriana | Ordinary shares | 100% | 100%
| MAPFRE MSV Life plc | Level 7 The Mall Floriana | Ordinary shares | 50% | 50%
| Church Wharf Properties Limited | Middle Sea House Floriana | Ordinary shares | 75% | 75%

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
163
20.Investment in subsidiary undertakings - continued
The Group’s aggregated assets and liabilities and the results of its subsidiary
undertakings that have non-controlling interest, before elimination entries, are as
follows:

| 2022 | % Held by non- controlling interests | Assets | Liabilities | Revenues | Profit before tax | Net cash
|  |  | €’000 | €’000 | €’000 | €’000 | €’000
| MAPFRE MSV Life p.l.c. |  |  |  |  |  |
| (consolidated results) | 50% | 2,357,045 | 2,132,748 | 254,910 | 17,166 | 65,934
| Church Wharf |  |  |  |  |  |
| Properties Limited | 25% | 2,674 | 333 | — | 8 | (1)

| 2021 | % Held by non- controlling interests | Assets | Liabilities | Revenues | Profit before tax | Net cash
|  |  | €’000 | €’000 | €’000 | €’000 | €’000
| MAPFRE MSV Life p.l.c. |  |  |  |  |  |
| (consolidated results) | 50% | 2,721,437 | 2,499,570 | 329,195 | 16,685 | (5,637)
| Church Wharf |  |  |  |  |  |
| Properties Limited | 25% | 2,623 | 284 | — | (414) | —

The amount of dividends that can be distributed in cash by MAPFRE MSV Life p.l.c. is
restricted by the solvency requirements imposed by the MFSA Regulations.
In addition to the subsidiary undertakings above, MAPFRE MSV Life p.l.c. also held
the following investments in subsidiary undertakings:

| Subsidiary undertakings | Registered office | Class of shares held | Percentage of shares held
|  |  |  | 2022 | 2021
| Growth Investment Limited (Company in liquidation) (held indirectly by MAPFRE MSV Life p.l.c.) | Pjazza Papa Giovanni XXIII Floriana | Ordinary shares | 50% | 50%

Note 36 explains the Transfer of Business Agreement entered into during the year with
respect to Growth Investments Limited.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
164
20.Investment in subsidiary undertakings - continued
During 2011, the Company acquired control of MAPFRE MSV Life p.l.c. following a
shareholders’ agreement. MAPFRE MSV Life p.l.c. had previously been accounted for
as an associated undertaking.
As a result of this business combination, Church Wharf Properties Limited, which was
previously classified as an associated undertaking, also became a subsidiary in view of
the fact that the remaining interest in this company is held by MAPFRE MSV Life
p.l.c.
As disclosed in prior years’ financial statements, the Company’s 100% holding in
Progress Assicurazioni S.p.A. (‘Progress’) was derecognised in 2009. This was due to
Progress being put into compulsory administrative liquidation. Subsequent bankruptcy
procedures were also initiated and accordingly, the investment was fully written off in
previous years. A subordinated loan receivable from Progress by a Group company
amounting to €8.50 million has also been fully provided for in previous years. A
scheme of distribution was communicated by the liquidator in 2021 which was
executed during 2022. A final payment of 6.35% of the subordinated loan receivable
was received by MAPFRE Middlesea p.l.c. amounting to €0.54 million. The Directors
are not aware of any developments that could have an impact on the Company’s
obligations attached to this investment.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
165
21. Investment in associated undertakings

|  | Group | Company
|  | €’000 | €’000
| At 1 January 2021 |  |
| Cost | 14,480 | 294
| Accumulated share of associated undertaking's equity | 91 | 91
| Accumulated fair value movements | 10,603 | —
| Net book amount | 25,174 | 385
| Year ended 31 December 2021 |  |
| Opening net book amount | 25,174 | 385
| Share of associated undertaking's movement in equity | (2) | (2)
| Fair value movement | (2,341) | —
| Closing net book amount | 22,831 | 383
| At 31 December 2021 |  |
| Cost | 14,480 | 294
| Accumulated share of associated undertaking's equity | 89 | 89
| Accumulated fair value movements | 8,262 | —
| Net book amount | 22,831 | 383

| Year ended 31 December 2022 |  |
| Opening net book amount | 22,831 | 383
| Share of associated undertaking's movement in equity | 6 | 6
| Fair value movement | 190 | —
| Closing net book amount | 23,027 | 389
| At 31 December 2022 |  |
| Cost | 14,480 | 294
| Accumulated share of associated undertaking's equity | 95 | 95
| Accumulated fair value movements | 8,452 | —
| Net book amount | 23,027 | 389

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
166
21. Investment in associated undertakings - continued
The Group’s aggregated assets and liabilities and the share of the results of its
associated undertaking, which is unlisted is as follows:

| 2022 | Registered office | Assets | Liabilities | Revenues | Profit after tax | Percentage of shares held
|  |  | €’000 | €’000 | €’000 | €’000 |
| Middlesea Assist Limited | Europa Centre Floriana | 1,456 | 662 | 2,863 | 195 | 49%

| 2021 | Registered office | Assets | Liabilities | Revenues | Profit after tax | Percentage of shares held
|  |  | €’000 | €’000 | €’000 | €’000 |
| Middlesea Assist Limited | Europa Centre Floriana | 1,556 | 775 | 2,622 | 181 | 49%

In addition to the associated undertakings above, MAPFRE MSV Life p.l.c. also held
the following investments in associated undertakings:

| Associated undertakings | Registered office | Class of shares held | Percentage of shares held
|  |  |  | MSV | Group
|  |  |  | 2022 | 2021 | 2022 | 2021
| Plaza Centres p.l.c. | The Plaza Commercial Centre |  |  |  |  |
|  | Bisazza Street Sliema | Ordinary shares | 31.42% | 31.42% | 31.42% | 31.42%
| Tigne Mall | The PointShoppi ng Mall |  |  |  |  |
|  | Tigne Point Sliema | Ordinary shares | 35.46% | 35.46% | 35.46% | 35.46%

Plaza Centres p.l.c. and Tigne Mall p.l.c. are listed on the Malta Stock Exchange and
their share price as at 31 December 2022 was €0.73 and €0.84 respectively (31
December 2021: €0.93 and €0.75 respectively).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
167
22. Other investments
The investments are summarised by measurement category in the table below.

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Fair value through profit and loss | 1,856,734 | 2,202,757 | 1,789 | 2,151
| Other available-for-sale | 10,308 | 6,231 | 10,308 | 6,231
| Loans and receivables | 125,860 | 212,923 | — | —
|  | 1,992,902 | 2,421,911 | 12,097 | 8,382

(a)Investments at fair value through profit or loss
Analysed by type of investment as follows:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Equity securities, and units in unit trusts | 973,927 | 1,083,341 | 1,186 | 1,393
| Debt securities | 777,854 | 1,005,906 | 603 | 758
| Assets held to cover linked liabilities - |  |  |  |
| collective investment schemes | 102,255 | 113,510 | — | —
| Forward foreign exchange contracts | 2,698 | — | — | —
| Total investments at fair value through profit or loss | 1,856,734 | 2,202,757 | 1,789 | 2,151

Technical provisions for linked liabilities amounted to €103.00 million as at 31
December 2022 (2021: €114.80 million). Linked liabilities are included in technical
provisions for insurance contracts, investments contracts with DPF and investment
contracts without DPF.
At 31 December 2022, the Group had €66.1 million financial commitments in respect
of uncalled capital (2021: €34.5 million).
Equity securities and collective investment schemes other than those at Company level
are substantially non-current assets in nature.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
168
22.Other investments - continued
(a)Investments at fair value through profit or loss - continued
The movements for the year are summarised as follows:

|  | Group | Company
|  | €’000 | €’000
| Group |  |
| Year ended 31 December 2021 |  |
| Opening net book amount | 2,031,590 | 2,934
| Additions | 1,376,549 | —
| Disposals | (1,284,046) | (704)
| Net fair value gains/(losses) | 77,889 | (79)
| Closing net book amount | 2,201,982 | 2,151
| Year ended 31 December 2022 |  |
| Opening net book amount | 2,201,982 | 2,151
| Additions | 1,312,024 | —
| Disposals | (1,452,223) | —
| Net fair value losses | (205,049) | (362)
| Closing net book amount | 1,856,734 | 1,789

There are no derivative financial liabilities in 2022. Derivative financial liabilities
amounting to €0.78 million in 2021, included in the table above, are classified within
liabilities in the statement of financial position.
(b)Other available-for-sale financial assets

|  | Group & Company
|  | 2022 | 2021
|  | €'000 | €'000
| Listed debt securities | 9,738 | 5,579
| Listed shares | 570 | 652
|  | 10,308 | 6,231

Listed debt securities have contractual terms that give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding. Their credit rating, using Standard & Poors rating is as below:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
169
22.Other investments - continued
(b)Other available-for-sale financial assets - continued

|  | Group & Company
|  | 2022 | 2021
|  | €’000 | €’000
| AAA | 1,964 | —
| AA | 665 | —
| A | 3,141 | 2,484
| BBB | 3,871 | 2,980
| BB or lower | 97 | 115
|  | 9,738 | 5,579

The movements for the year are summarised as follows:
Listed debt securities

|  | Group & Company
|  | 2022 | 2021
|  | €’000 | €’000
| Year ended 31 December |  |
| Opening net book amount | 5,579 | 1,528
| Additions | 5,135 | 4,531
| Disposals | (203) | (398)
| Net fair value losses | (773) | (82)
| Closing net book amount | 9,738 | 5,579

Listed shares

|  | Group & Company
|  | 2022 | 2021
|  | €’000 | €’000
| Year ended 31 December |  |
| Opening net book amount | 652 | 892
| Additions | — | 600
| Disposals | — | (882)
| Net fair value (losses)/gains | (82) | 42
| Closing net book amount | 570 | 652

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
170
22.Other investments - continued
(c)Loans and receivables
Analysed by type of investment as follows:

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| Deposits with banks or credit institutions | 116,728 | 204,888
| Loans secured on policies | 9,132 | 8,035
|  | 125,860 | 212,923

Maturity of deposits with bank or credit institutions:

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| Within 3 months | 19,564 | 25,955
| Within 1 year but exceeding 3 months | 76,527 | 118,594
| Between 1 and 5 years | 20,637 | 60,339
|  | 116,728 | 204,888

The above deposits earn interest as follows:

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| At fixed rates | 116,728 | 204,888
|  | 116,728 | 204,888

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
171
22. Other investments - continued
(c)Loans and receivables - continued
The movements for the year (excluding deposits) are summarised as follows:

| Group |
|  | Loans
|  | secured on
|  | policies
|  | €’000
| Year ended 31 December 2021 |
| Opening net book amount | 8,214
| Additions | 1,178
| Disposal (sale and redemptions) | (1,357)
| Closing net book amount | 8,035
| Year ended 31 December 2022 |
| Opening net book amount | 8,035
| Additions | 2,182
| Disposal (sale and redemptions) | (1,085)
| Closing net book amount | 9,132

The above loans earn interest at fixed rates.
23. Deferred income tax

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Balance at 1 January | 40,286 | 35,117 | 721 | 898
| Movements during the year: |  |  |  |
| Profit or loss account (Note 12) | (37,183) | 5,156 | 313 | (190)
| Other comprehensive income | (31) | 13 | (31) | 13
| Balance at 31 December - net | 3,072 | 40,286 | 1,003 | 721

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
172
23.Deferred income tax - continued
Deferred income taxes are calculated on all temporary differences using a principal tax
rate of 35% (2021: 35%) with the exception of investment property and freehold and
other property, for which deferred income taxes may be calculated using a principal tax
rate of 8% or 10% of the carrying amount (2021: 8% or 10%), if appropriate. The
analysis of deferred tax (assets)/liabilities is as follows:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Temporary differences on property, plant and equipment | 4,365 | 2,608 | 991 | 607
| Temporary differences attributable to investment property, unrealised capital losses and fair value adjustments on financial assets | 752 | 81,496 | 1,082 | 1,218
| Temporary differences attributable to unabsorbed tax losses and allowances carried forward | (1,908) | (43,646) | (932) | (932)
| Temporary differences attributable to other provisions | (137) | (172) | (138) | (172)
| Balance at 31 December - net | 3,072 | 40,286 | 1,003 | 721

Deferred income tax assets and liabilities are offset when there is a legally enforceable
right to set off a current tax asset against a current tax liability. The following amounts
determined after appropriate offsetting are shown in the statements of financial
position:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Deferred tax asset | (8,750) | (2,313) | (1,292) | (1,268)
| Deferred tax liability | 11,822 | 42,599 | 2,295 | 1,989
|  | 3,072 | 40,286 | 1,003 | 721

The tax effect of temporary differences attributable to the value of in-force business
amounts to €3.91 million (2021: €5.34 million).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
173
23.Deferred income tax - continued
The deferred income tax assets and liabilities are, principally, recoverable after more
than 12 months.
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that
the realisation of the related tax benefit through future taxable profits is probable.
The Group and Company have unutilised capital gains of €9.05 million (2021: €6.53
million), which give rise to a deferred tax liability of €3.17 million (2021: €2.28
million) that has not been recognised in these financial statements. The Group also has
unutilised trading losses of €2.48 million (2021: €2.40 million) giving rise to a deferred
tax asset of €0.87 million (2021: €0.84 million) which has not been recognised in these
financial statements.
The Group’s and Company’s deferred tax asset and liability were established on the
basis of tax rates that were substantively enacted as at the financial year end.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
174
24.Insurance liabilities and reinsurance assets
Technical provisions – insurance contracts and investment contracts with DPF, including
reinsurers’ share of technical provisions

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Gross |  |  |  |
| Short term insurance contracts-general business |  |  |  |
| - claims outstanding | 54,167 | 53,767 | 54,167 | 53,767
| - provision for unearned premiums | 40,632 | 37,953 | 40,632 | 37,953
| Group life insurance contracts |  |  |  |
| - claims outstanding | 316 | 559 | 316 | 559
| - long term business provision | 794 | 726 | 794 | 726
| Long term contracts |  |  |  |
| - individual life insurance contracts | 400,172 | 506,666 | — | —
| - investment contracts with DPF | 1,608,374 | 1,870,997 | — | —
| Total technical provisions, gross | 2,104,455 | 2,470,668 | 95,909 | 93,005
| Recoverable from reinsurers |  |  |  |
| Short-term insurance contracts |  |  |  |
| - claims outstanding | 21,876 | 24,890 | 21,876 | 24,890
| - provision for unearned premiums | 7,370 | 7,424 | 7,370 | 7,424
| Long term contracts |  |  |  |
| - individual life insurance contracts | 476 | 933 | — | —
| Total reinsurers' share of technical provisions | 29,722 | 33,247 | 29,246 | 32,314
| Net |  |  |  |
| Short-term insurance contracts |  |  |  |
| - claims outstanding | 32,291 | 28,877 | 32,291 | 28,877
| - provision for unearned premiums | 33,262 | 30,529 | 33,262 | 30,529
| Group life insurance contracts |  |  |  |
| - claims outstanding | 316 | 559 | 316 | 559
| - long term business provision | 794 | 726 | 794 | 726
| Long term contracts |  |  |  |
| - individual life insurance contracts | 399,696 | 505,733 | — | —
| - investment contracts with DPF | 1,608,374 | 1,870,997 | — | —
| Total technical provisions, net | 2,074,733 | 2,437,421 | 66,663 | 60,691

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
175
24.Insurance liabilities and reinsurance assets - continued
Technical provisions in relation to short term insurance contracts are classified as
current liabilities, in that, claims outstanding represent events that happened and which
would normally be settled within the normal operating cycle. The timing of payment
can be dependent on factors, like court cases, that could defer such payment to beyond
a year from the reporting date. Technical provisions in relation to long term business
are substantially non-current.
(a)Short-term insurance contracts – claims outstanding
The gross claims reported are net of expected recoveries from salvage and subrogation.
The technical provisions are largely based on case-by-case estimates adjusted for in
those instances where the ultimate cost determined by estimation techniques differs.
This is further supplemented with additional provisions for IBNR.
Motor claims occurring between 2018 and 2022 have been determined on an ultimate
cost basis having regard to estimation techniques establishing the average ultimate cost
per claim, which average was applied to the number of reported claims and the
estimated number of incurred but not yet reported claims. Motor large losses, in the
main involving fatalities or serious bodily injury, are still reserved at the case-by-case
reserve estimate rather than the established ultimate cost average.
The development tables in this note give an indication of the time it takes to settle
certain claims. This is attributable to certain classes of business taking several years to
develop and is also due to the length of time it takes for the respective cases to be
resolved in court.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
176
24. Insurance liabilities and reinsurance assets - continued
(a)Short term insurance contracts – claims outstanding - continued
The top half of the table below illustrates how the Company’s estimate of total claims incurred for each accident year has changed at successive year-
ends on a net basis. The bottom half of the table reconciles the cumulative claims to the amount appearing in the statement of financial position on a
net basis. The accident-year basis is considered to be the most appropriate for the general business written by the Company.

| Company |  |  |  |  |  |  |  |  |  |  |  |
| Accident year | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | Total
|  | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000 | €’000
| Estimate of ultimate claims cost: |  |  |  |  |  |  |  |  |  |  |  |
| - at end of accident year | 15,756 | 16,104 | 17,775 | 23,216 | 30,078 | 33,106 | 33,539 | 33,848 | 28,126 | 34,703 | 39,744 | —
| - one year later | 14,183 | 14,205 | 16,060 | 23,350 | 30,320 | 33,952 | 33,645 | 35,714 | 28,373 | 34,148 | — | —
| - two years later | 12,932 | 13,465 | 15,565 | 22,442 | 29,171 | 33,638 | 33,846 | 36,717 | 28,529 | — | — | —
| - three years later | 12,543 | 13,288 | 15,608 | 22,786 | 28,863 | 33,325 | 33,248 | 37,196 | — | — | — | —
| - four years later | 12,586 | 13,178 | 15,611 | 22,551 | 29,038 | 33,158 | 32,623 | — | — | — | — | —
| - five years later | 12,144 | 13,044 | 15,420 | 22,489 | 29,030 | 32,970 | — | — | — | — | — | —
| - six years later | 12,311 | 13,016 | 15,247 | 22,656 | 28,807 | — | — | — | — | — | — | —
| - seven years later | 12,094 | 13,233 | 15,222 | 22,764 | — | — | — | — | — | — | — | —
| - eight years later | 11,981 | 13,247 | 15,452 | — | — | — | — | — | — | — | — | —
| - nine years later | 11,965 | 13,245 | — | — | — | — | — | — | — | — | — | —
| - ten years later | 11,962 | — | — | — | — | — | — | — | — | — | — | —
| Current estimate of cumulative claims | 11,962 | 13,245 | 15,452 | 22,764 | 28,807 | 32,970 | 32,623 | 37,196 | 28,529 | 34,148 | 39,744 | 297,440
| Cumulative payments to date | (11,599) | (13,026) | (14,973) | (21,833) | (28,173) | (31,711) | (31,609) | (35,367) | (26,317) | (28,775) | (22,637) | (266,020)
| Liability recognised in the statement of financial position | 363 | 219 | 479 | 931 | 634 | 1,259 | 1,014 | 1,829 | 2,212 | 5,373 | 17,107 | 31,420
| Liability in respect of prior years |  |  |  |  |  |  |  |  |  |  |  | 871
| Total reserve included in the statement of financial position |  |  |  |  |  |  |  |  |  |  |  | 32,291

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
177
24.Insurance liabilities and reinsurance assets - continued
(a)Short-term insurance contracts – claims outstanding - continued
The Company benefits from reinsurance programmes that were purchased in the current
and prior years which include proportional cover supplemented by excess of loss
reinsurance cover. The reinsurers’ share of claims liabilities is estimated net of the
provision for known and expected incidents of insolvency of reinsurers.
Movements in claims and loss adjustment expenses:

|  | Group and Company
|  | Year ended 2021
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| Total at beginning of year | 50,803 | (25,203) | 25,600
| Claims settled during the year | (37,134) | 5,524 | (31,610)
| Increase/(decrease) in liabilities |  |  |
| - arising from current year claims | 38,348 | (3,644) | 34,704
| - arising from prior year claims | 1,750 | (1,567) | 183
| At end of year | 53,767 | (24,890) | 28,877

|  | Group and Company
|  | Year ended 2022
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| Total at beginning of year | 53,767 | (24,890) | 28,877
| Claims settled during the year | (42,336) | 7,011 | (35,325)
| Increase/(decrease) in liabilities |  |  |
| - arising from current year claims | 43,241 | (3,496) | 39,745
| - arising from prior year claims | (505) | (501) | (1,006)
| At end of year | 54,167 | (21,876) | 32,291

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
178
24.Insurance liabilities and reinsurance assets - continued
(a)Short-term insurance contracts – claims outstanding - continued
Movements in claims and loss adjustments expenses - continued
The Group continuously monitors closely the development in insurance liabilities in
order to ascertain the adequacy of its claims reserves. Movements in reserves in respect
of claims occurring in previous years arise when these claims are actually settled and/or
when reserves are revised to reflect new information that emerges.
The Company registered a gross favourable run-off of €0.50 million (2021:
unfavourable €1.75 million). After the effect of reinsurance, this amounts to a
favourable €1.01 million (2021: unfavourable €0.18 million). This net run-off arose
principally from a favourable development on claims in the health and motor class of
direct general business of insurance.
(b)Short-term insurance contracts - provision for unearned premiums and unexpired risks
The movements for the year are summarised as follows:

|  | Group and Company
|  | Year ended 2021
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| At beginning of year | 34,974 | (5,990) | 28,984
| Net charge/(credit) to profit or loss | 2,979 | (1,434) | 1,545
| At end of year | 37,953 | (7,424) | 30,529

|  | Group and Company
|  | Year ended 2022
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| At beginning of year | 37,953 | (7,424) | 30,529
| Net charge to profit or loss | 2,679 | 54 | 2,733
| At end of year | 40,632 | (7,370) | 33,262

No provision for unexpired risks was recognised as at 31 December 2022 (€0.08
million in 2021).
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
179
24.Insurance liabilities and reinsurance assets - continued
(c)Group Life insurance contracts
Claims outstanding
Movement in claims outstanding is summarised as follows:

|  | Group and Company
|  | Year ended 2021
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| At beginning of year | 702 | (113) | 589
| Claims settled during the year | (1,250) | 122 | (1,128)
| Increase in net liabilities | 1,107 | (9) | 1,098
| At end of year | 559 | — | 559

|  | Group and Company
|  | Year ended 2022
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| At beginning of year | 559 | — | 559
| Claims settled during the year | (839) | — | (839)
| Increase in net liabilities | 596 | — | 596
| At end of year | 316 | — | 316

Long term business provision
The balance on the long term business provision has been assessed by the Company’s
appointed actuary as being sufficient to meet liabilities as at 31 December 2022. The
net assets representing this long term business provision, which are included under the
respective headings in the Group’s overall statement of financial position, are as
follows:

|  | 2022 | 2021
|  | €’000 | €’000
| Other investments | 1,234 | 1,396
| Insurance and other receivables | 244 | 361
| Cash and cash equivalents | 634 | 862
| Net claims outstanding | (316) | (559)
| Insurance and other payables | (1,002) | (1,334)
| Long term business provision, net of reinsurance | 794 | 726

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
180
2 4. Insurance liabilities and reinsurance assets - continued
(d)Long term business – Individual Insurance life contracts and investment contracts with
DPF
Individual life insurance contracts

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| Gross technical provisions |  |
| - claims outstanding | 6,760 | 9,129
| - long term business provision | 393,412 | 497,537
|  | 400,172 | 506,666
| Reinsurers’ share of technical provisions |  |
| - claims outstanding | 476 | 933
|  | 476 | 933
| Net technical provisions |  |
| - claims outstanding | 6,284 | 8,196
| - long term business provision | 393,412 | 497,537
|  | 399,696 | 505,733

The movements for the year are summarised as follows:

|  | Group
|  | Year ended 2021
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| At beginning of year | 529,554 | (501) | 529,053
| Charge to the profit or loss account | (22,888) | (432) | (23,320)
| At end of year | 506,666 | (933) | 505,733

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
181
24. Insurance liabilities and reinsurance assets - continued
(d) Long term business – Individual Insurance life contracts and investment contracts with
DPF - continued
Individual life insurance contracts - continued

|  | Group
|  | Year ended 2022
|  | Gross | Reinsurance | Net
|  | €’000 | €’000 | €’000
| At beginning of year | 506,666 | (933) | 505,733
| (Credit)/charge to the profit and loss account | (106,494) | 457 | (106,037)
| At end of year | 400,172 | (476) | 399,696

The above liabilities are substantially non-current in nature.

|  | Group
|  | 2022 | 2021
|  | €’000 | €’000
| Investment contracts with DPF (gross and net) |  |
| - claims outstanding | 40,635 | 36,944
| - long term business provision | 1,567,739 | 1,834,053
|  | 1,608,374 | 1,870,997

The movements for the year are summarised as follows:

|  | 2022 | 2021
|  | €’000 | €’000
| Year ended 31 December |  |
| At beginning of year | 1,870,997 | 1,766,724
| (Credit)/charge to the profit and loss account | (262,623) | 104,273
| At end of year | 1,608,374 | 1,870,997

The above liabilities are substantially non-current in nature.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
182
24. Insurance liabilities and reinsurance assets - continued
(d) Long term business – Individual Insurance life contracts and investment contracts with
DPF - continued
Long term contracts – assumptions, changes in assumptions and sensitivity
(i)Assumptions
Rate of future investment return
The rate of future investment return (valuation interest rate) is calculated in accordance
with the Insurance Regulations. In accordance with these rules the calculation of the
rate of future investment return is based on a prudent assessment of the yields generated
by the long term business assets. This assessment does not include any allowance for
capital growth on assets other than bonds. On bonds the allowance must be consistent
with the yield to maturity of the instrument in the market. This could be interpreted as
setting the rate of future investment return in line with the weighted average portfolio
yield taking into account certain risk adjustments.
Bonus rates
The current rates of reversionary and terminal bonuses are determined by the Board in
consultation with the Approved Actuary. Different bonus rates are declared on different
generations of contracts depending on the type of product, cost structure, past
investment performance and premium rates. Different bonuses are declared to maintain
equity between different generations of contract holders and products with different
characteristics. Future bonus rates are not guaranteed and the assumptions are set to
allow for a fair and orderly run-off of the fund.
The levels of reversionary bonus rates are affected by measures taken to provide
resilience to market conditions, and to provide for future payments of terminal bonuses.
These measures are not intended, over the long term, to be a source of profit or loss.
Policy maintenance expenses
The per policy maintenance expense has been determined by reference to the Group’s
cost base.
Minimum reserve
With profits policy reserves are equal to the underlying asset share as aggregated at the
homogeneous product cohort level.
The minimum reserve for unit linked contracts is determined on a policy by policy basis
where appropriate and is set equal to the current surrender value or zero whichever is
greater.
The minimum reserve for protection contracts is also determined on a policy by policy
basis and is set equal to the policy reserve or zero, whichever is higher.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
183
2 4.Insurance liabilities and reinsurance assets - continued
(d)Long term business – Individual Insurance life contracts and investment contracts with
DPF - continued
Long term contracts – assumptions, changes in assumptions and sensitivity - continued
(i)Assumptions - continued
Mortality
The Group makes reference to the AMC00 (2021: AMC00) standard mortality table.
Mortality experience is reviewed annually and assumptions are set separately for
protection and savings and investment contracts having regard to past experience and
trends. A margin for adverse deviation is applied to best estimate mortality rates when
determining the prudent valuation assumption.
(ii) Changes in assumptions
In accordance with normal practice, investment return assumptions were reviewed to
reflect market movements over the year. Similarly, surrender and policy expense
expectations were also updated. The combined impact of these changes in assumptions
was charged against the technical result for the year.
(iii) Sensitivity analysis
The directors have considered the sensitivity of the key variables underlying the
liability for long term contracts. The most sensitive assumption is the rate of future
investment return that will be driven by market forces. Sensitivity analysis for interest
rate risk and equity price risk has been disclosed in Note 4. The Insurance Regulations
ensure a consistent and prudent derivation of this key estimate as described above. The
Group’s bonus policy is also influenced by market conditions. The Group’s reserving
policy considers market conditions over the longer term through prudent assumptions of
future investment returns combined with a consistent view of future bonuses. This acts
to mitigate the impact of market movements and profit or loss is not affected by
changes in the rate of regular bonus.

|  | 2022 | 2021
|  | €’000 | €’000
| Long term business provision | 54,870 | 59,784
| Claims outstanding | 843 | 1,085
|  | 55,713 | 60,869

The above liability is considered to be substantially non-current in nature.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
184
25.Deferred acquisition costs – short term insurance contracts

|  | Group & Company
|  | 2022 | 2021
|  | €’000 | €’000
| Year ended 31 December |  |
| Opening net book amount | 8,427 | 8,080
| Net amount charged to profit or loss | 940 | 347
| Closing net book amount | 9,367 | 8,427

Deferred acquisition costs are all classified as current assets.
26. Insurance and other receivables

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Receivables arising from direct insurance operations: |  |  |  |
| - due from policyholders | 920 | 272 | 920 | 272
| - due from agents, brokers and intermediaries | 16,635 | 16,297 | 16,635 | 16,297
| - due from reinsurers | 291 | 363 | 291 | 363
| Receivables arising from reinsurance operations: |  |  |  |
| - due from reinsurers | 16 | 16 | 16 | 16
| Other loans and receivables: |  |  |  |
| - prepayments | 5,476 | 4,669 | 1,697 | 1,806
| - accrued interest and rent | 10,593 | 10,507 | 377 | 173
| - receivables from group undertakings | — | — | 420 | 470
| - receivables from associated undertaking | 183 | 212 | 183 | 212
| - other receivables | 66 | 120 | — | —
| Provision for impairment of receivables | (440) | (387) | (440) | (387)
|  | 33,740 | 32,069 | 20,099 | 19,222
| Current portion | 33,740 | 32,069 | 20,099 | 19,222

Balances due from group undertakings, associated undertaking and other receivables
are unsecured and non-interest bearing.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
185
26.Insurance and other receivables - continued
Movements in the provision for impairment of receivables are as follows:

|  | Group and Company
|  | 2022 | 2021
|  | €’000 | €’000
| Balance as at 1 January | 387 | 333
| Increase in provision for impairment | 188 | 160
| Release of provision for impairment during the year | (135) | (106)
| Balance as at 31 December | 440 | 387

27.Cash and cash equivalents
For the purpose of the statements of cash flows, the year-end cash and cash equivalents
comprise the following:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Cash at bank and in hand | 137,286 | 71,443 | 11,130 | 11,575

As at 31 December 2022 an amount of €2.16 million (2021: €3.14 million) within
deposits with banks or credit institutions, was held in a margin account as collateral
against exchange traded futures.
28.Share capital

|  |  | Group and Company
|  |  |  | 2022 | 2021
|  |  |  | €’000 | €’000
| Authorised |  |  |  |
| 150 million ordinary shares of €0.21 each |  | 31,500 | 31,500
| Issued and fully paid |  |  |  |
| 92 million ordinary shares of €0.21 each |  | 19,320 | 19,320

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
186
29.Other reserves
Group

|  | Value of | Freehold | Available- | Total
|  | in-force | land and | for-sale |
|  | business | buildings | investments |
|  | €'000 | €'000 | €'000 | €'000
| Balance at 1 January 2021 | 38,597 | — | 232 | 38,829
| Fair value movements -gross | — | — | 117 | 117
| Fair value movements -tax | — | — | (64) | (64)
| Available-for-sale investments - reclassified to profit or loss |  |  |  |
| - gross | — | — | (155) | (155)
| - related tax | — | — | 53 | 53
| Revaluation gain on freehold land and buildings | — | 1,081 | — | 1,081
| Share of increase in value of in-force business of subsidiary undertaking | 4,956 | — | — | 4,956
| Balance at 31 December 2021 | 43,553 | 1,081 | 183 | 44,817
| Balance at 1 January 2022 | 43,553 | 1,081 | 183 | 44,817
| Fair value movements -gross | — | — | (831) | (831)
| Fair value movements -tax | — | — | 61 | 61
| Revaluation gain on freehold land and buildings reclassified to retained earning | — | (225) | — | (225)
| Share of decrease in value of in-force business of subsidiary company | (3,633) | — | — | (3,633)
| Balance at 31 December 2022 | 39,920 | 856 | (587) | 40,189

The above reserves are not distributable reserves.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
187
29.Other reserves - continued
Company

|  | Investment | Investment | Available- |
|  | in subsidiary | in associated | for-sale |
|  | undertakings | undertakings | investments | Total
|  | €’000 | €’000 | €’000 | €’000
| Balance at 1 January 2021 | 34,663 | 91 | 232 | 34,986
| Fair value movements -gross | — | — | 117 | 117
| Fair value movements -tax | — | — | (64) | (64)
| Available-for-sale investment reclassified to profit or loss |  |  |  |
| - gross | — | — | (155) | (155)
| - related tax | — | — | 53 | 53
| Other | — | (2) | — | (2)
| Balance at 31 December 2021 | 34,663 | 89 | 183 | 34,935
| Balance at 1 January 2022 | 34,663 | 89 | 183 | 34,935
| Fair value movements -gross | — | — | (831) | (831)
| Fair value movements -tax | — | — | 61 | 61
| Other | — | 6 | — | 6
| Balance at 31 December 2022 | 34,663 | 95 | (587) | 34,171

The above reserves are not distributable reserves.
30. Provision for other liabilities and charges
The Group and Company operate a defined benefit plan in favour of a former Executive
Chairman. The pension plan defines an amount of pension benefit that he receives on
retirement. The liability recognised in the statements of financial position is the present
value of the obligation determined by discounting estimated future cash outflows.
The following table shows the changes in the present value of the pension obligation
and amounts shown in the profit or loss and other comprehensive income:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
188
30. Provision for other liabilities and charges - continued

|  | Group and Company |
|  | 2022 | 2021 |
|  | €’000 | €’000 |
| At 1 January | 997 | 1,057 |
| Interest expense - profit or loss | 7 | 3 |
| Settlements | (62) | (61) |
| Re-measurement actuarial loss - other comprehensive income | (88) | (2) |
| At 31 December | 854 | 997 |

The following payments as expected in the future years:

|  | Group and Company
|  | 2022 | 2021
|  | €’000 | €’000
| Within one year | 65 | 61
| After more than one year | 789 | 936
|  | 854 | 997

The significant assumptions used in determining the pension obligation are shown
below:

|  | Group and Company
|  | 2022 | 2021
| Mortality | AMC00 | AMC00
| Discount rate | 3.8% | 0.7%
| Inflation rate | 2.1% | 1.2%

A quantitative analysis of the impact on the pension obligation for the significant
assumptions is shown below:

|  | Group and Company
|  | 2022 | 2021
|  | €000 | €000
| Discount Rate - 1% point increase | (64) | (87)
| Discount Rate - 1% point decrease | 72 | 100
| Inflation Rate - 1% point increase | 68 | 93
| Inflation Rate - 1% point decrease | (61) | (82)

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
189
31.Insurance and other payables

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Creditors arising out of direct insurance operations | 11,057 | 13,641 | 2,922 | 4,063
| Creditors arising out of reinsurance operations | 38 | 172 | 38 | 172
| Amount owed to associated undertakings | 264 | 217 | 257 | 217
| Amount owed to group undertakings | — | — | 1,012 | 1,013
| Social security and other tax payables | 4,295 | 4,540 | 1,711 | 1,645
| Accruals and other payables | 9,173 | 9,548 | 3,963 | 3,950
| Deferred income | 3,185 | 3,055 | 2,476 | 2,341
|  | 28,012 | 31,173 | 12,379 | 13,401

| Current | 27,797 | 30,974 | 12,379 | 13,401
| Non-current | 215 | 199 | — | —
|  | 28,012 | 31,173 | 12,379 | 13,401

Balances due to group undertakings are unsecured and non-interest bearing.
Deferred income for the Group includes front-end fees received from holders of
investment contracts without DPF as a prepayment for asset management and related
services and rental income received in advance. These amounts are non-refundable and
are released to income as the services are rendered.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
190
32.Cash generated from operations
Reconciliation of profit before tax to cash (used in)/ generated from operations:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Profit before tax | 22,182 | 20,390 | 5,991 | 4,063
| Adjustments for: |  |  |  |
| Depreciation (Note 18) | 1,071 | 855 | 579 | 518
| Increase in provision for impairment of receivables (Note 26) | 53 | 54 | 53 | 54
| Settlement of provision for liabilities and charges (Note 30) | (62) | (61) | (62) | (61)
| Amortisation (Note 16) | 2,575 | 2,207 | 1,973 | 1,523
| Depreciation of right-of-use assets | 338 | 328 | 307 | 270
| Lease payments against lease liabilities | (387) | (411) | (347) | (341)
| Adjustments relating to investment return | 283,604 | (112,135) | (342) | 274
| Loss on disposal of intangible asset | 2 | — | — | —
| Revaluation loss on property (Note 18) | — | 1,521 | — | —
| Movements in: |  |  |  |
| Insurance and other receivables | (1,735) | 63 | (900) | 310
| Deferred acquisition cost (Note 25) | (940) | (347) | (940) | (347)
| Reinsurers' share of technical provisions | 2,636 | (1,440) | 3,068 | (1,008)
| Technical provisions | (370,480) | 94,456 | 2,904 | 5,733
| Insurance and other payables | (3,221) | 3,880 | (1,022) | 1,426
| Cash (used in)/generated from operations | (64,364) | 9,360 | 11,262 | 12,414

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
191
33.Commitments
Capital commitments
Commitments for capital expenditure not provided for in these financial statements are
as follows:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Authorised and not contracted for |  |  |  |
| - property, plant and equipment | 1,354 | 920 | 707 | 920
| - intangible assets | 3,517 | 2,914 | 1,326 | 2,914
| - investment property | — | 118 | — | —

| Authorised and contracted for |  |  |  |
| - property, plant and equipment | 132 | 903 | 110 | 684
| - intangible assets | 1,984 | 1,668 | 1,386 | 1,480
| - investment property | 1,427 | 3,834 | — | —
| - other investments | 47,937 | — | — | —

Operating lease commitments – where a Group company is a lessor
The Group and the Company lease out certain premises under operating leases. The
future minimum lease payments receivable under non-cancellable operating leases are
as follows:

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Not later than 1 year | 5,530 | 4,970 | 654 | 541
| Later than 1 year and not later than 5 years | 10,333 | 9,190 | 1,136 | 988
| Later than 5 years | 3,726 | 2,433 | — | 38
|  | 19,589 | 16,593 | 1,790 | 1,567

Rental income from operating leases recognised in profit or loss during the year is
disclosed in Note 8.
34.Contingencies
The Company has given guarantees to third parties amounting to €0.14 million (2021:
€0.19 million) not arising under contracts of insurance.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
192
35.Related party transaction s
In the normal course of business, the Group enters into various transactions with related
parties. Related parties are defined as those that have an ability to control or exercise
significant influence over the other party in making financial and operational decisions.
These include directors, key management personnel and shareholders, and their close
family members, who hold a substantial amount of the votes able to cast at general
meetings. Parent undertaking refers to MAPFRE S.A. and/or companies owned by
MAPFRE S.A.. Bank of Valletta p.l.c. is a related undertaking in light of its
shareholding in the Company and in MAPFRE MSV Life p.l.c.. Subsidiary
undertakings and associated undertakings refer to the companies listed in Notes 20 and
21 respectively.
Relevant particulars of related party transactions are as follows:
Group

|  | 2022 | 2021
|  | €’000 | €’000
| Sales of insurance contracts and other services |  |
| Transactions with a parent undertaking: |  |
| Commission received | 4,849 | 4,549
| Claims recoverable | 7,560 | 5,848
| Transactions with related undertaking: |  |
| Trailer fees receivable | 4 | 23
| Sale of insurance contracts | 1,039 | 925
| Dividends received and interest income | 1,221 | 1,589
| Rental income on investment property | 230 | 288
| Transactions with associated undertaking: |  |
| Sale of insurance contracts | 25 | 27
| Dividends received | 137 | 141
| Rental income on investment property | 43 | 36
| Reimbursement of expenses for back office support services | 19 | 17

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
193
35.Related party transactions - continued
Group - continued

|  | 2022 | 2021
|  | €’000 | €’000
| Purchase of products and services |  |
| Transactions with a parent undertaking: |  |
| Reinsurance premium ceded | 15,325 | 16,015
| Staff development training & Fringe Benefits | 5 | 7
| Expat staff benefits and services | 127 | 29
| Computer maintenance, Group IT shared services | 1,558 | 1,279
| Capitalisation of software development | 28 | 399
| Other back office support services | 802 | 417
| Investment management services | 16 | 4
| Commission payable | 120 | —
| Transactions with other related undertaking: |  |
| Acquisition costs payable | 4,304 | 5,552
| Bank charges | 207 | 169
| Bank interest payable | 197 | 208
| Investment management services | 64 | 96
| Claims paid | 335 | 428
| Transactions with associates undertaking: |  |
| Road side assistance and other back office support services | 2,750 | 2,500
| Claims paid | 11 | 4

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
194
35.Related party transactions - continued
Company

|  | 2022 | 2021 |
|  | €’000 | €’000 |
| Sales of insurance contracts and other services |  |  |
| Transactions with a parent undertaking: |  |  |
| Commission received | 4,849 | 4,417 |
| Claims recoverable | 6,918 | 5,518 |
| Transactions with related undertaking: |  |  |
| Sale of insurance contracts | 1,039 | 925 |
| Dividends received and interest income | 15 | — |
| Trailer fees receivable | 1 | — |
| Transactions with subsidiary undertaking: |  |  |
| Sale of insurance contracts | 294 | 232 |
| Dividends received | 1,176 | — |
| Rental income on investment property | 52 | 51 |
| Rental income from sub-letting of shared premises | 37 | 34 |
| Reimbursement of expenses for back office support services | 798 | 783 |
| Transactions with associated undertaking: |  |  |
| Sale of insurance contracts | 25 | 27 |
| Dividends received | 137 | 141 |
| Rental income on investment property | 43 | 36 |
| Reimbursement of expenses for back office support services | 19 | 17 |

MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
195
35.Related party transactions - continued
Company - continued

|  | 2022 | 2021
|  | €’000 | €’000
| Purchase of products and services |  |
| Transactions with a parent undertaking: |  |
| Reinsurance premium ceded | 14,992 | 14,483
| Staff development training & fringe benefits | 5 | 7
| Expat staff benefits and services | 127 | 29
| Computer maintenance, Group IT shared services | 564 | 534
| Capitalisation of software development | 28 | 351
| Other back office support services | 453 | 294
| Investment management services | 16 | 4
| Transactions with other related parties: |  |
| Bank charges | 119 | 85
| Bank interest payable | 20 | 47
| Claims paid | 335 | 428
| Transactions with subsidiaries |  |
| Reimbursement of expenses for back office support services | 1,886 | 515
| Claims paid | 165 | —
| Employer's contribution to defined contribution work pension scheme | 60 | —
| Transactions with associates |  |
| Road side assistance and other back office support services | 2,750 | 2,500
| Claims paid | 11 | 4

Key management personnel during 2022 and 2021 comprised the President & Chief
Executive Officer, Chief Executive Officers, Assistant General Managers, General
Manager, Chief Financial Officer, Chief Officers and Chief Underwriters. Total
remuneration paid by the Group to key management personnel amounted to €3.43
million (Company: €1.70 million). Corresponding figures for 2021 were €3.52 million
paid by the Group and €1.82 million paid by the Company.
Year-end balances arising from the above transactions:
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
196
35.Related party transactions - continued

|  | Group | Company
|  | 2022 | 2021 | 2022 | 2021
|  | €’000 | €’000 | €’000 | €’000
| Debtors arising out of direct insurance operations |  |  |  |
| -Related undertaking | 156 | 194 | 156 | 194
| -Parent undertaking | 148 | 116 | 148 | 116
| Creditors arising out of direct insurance operations |  |  |  |
| -Parent undertaking | 1,263 | 1,714 | 894 | 1,294
| -Related undertaking | 171 | 481 | — | —
| Amounts owed to |  |  |  |
| -Associated undertaking | 257 | 217 | 257 | 217
| -Subsidiary undertaking | — | — | 1,029 | 1,013
| Amounts owed by |  |  |  |
| -Associated undertaking | 183 | 212 | 183 | 212
| -Subsidiary undertaking | — | — | 500 | 472
| -Parent undertaking | 191 | 317 | 1 | 1
| Accruals - Parent undertaking | 277 | 126 | 163 | 85
| Reinsurers share of technical provisions |  |  |  |
| -Parent undertaking | 27,299 | 29,452 | 27,105 | 29,066
| Balance of Claims Outstanding |  |  |  |
| -Related undertaking | 55 | 311 | 55 | 311
| -Subsidiary undertaking | — | — | 156 | 307
| -Associated undertaking | 6 | 6 | 6 | 6
| Investment in related undertakings | 59,128 | 150,264 | 456 | 507
| Cash and cash equivalents | 111,723 | 44,264 | 5,513 | 6,735

All balances above have arisen in the course of the Group’s and Company’s normal
operations. Balances due from/to group undertakings are unsecured and non-interest
bearing.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
197
36.Events during the period
Growth Investments Limited
During the financial reporting period ended 31 December 2022, the subsidiary of
MAPFRE MSV Life p.l.c., Growth Investments Limited ("GIL"), ceased its principal
activities and the shareholders resolved to liquidate the company effective 31 August
2022. The subsidiary has completed the transfer of business and closure of clients'
accounts and accordingly surrendered its license for the provision of investment
services. The appointed external auditor is currently auditing the subsidiary's winding
up accounts and scheme of distribution.
37. Statutory information
MAPFRE Middlesea p.l.c. is a public limited company and is incorporated in Malta.
The Group is 55.83% owned by MAPFRE Internaciona l S.A. (the “immediate parent”),
a company registered in Spain, the registered office of which is situated at Carretera de
Pozuelo 52, Majadahonda 28222, Madrid, Spain.
The Group’s ultimate parent is Fundación MAPFRE, the registered office of which is
situated at Paseo de Recoletos 23, 28004, Madrid, Spain.
The Group’s results are consolidated at MAPFRE S.A. level of which Fundación
MAPFRE is the parent and MAPFRE Internacional S.A. is the subsidiary. MAPFRE
S.A. is a company the registered office of which is situated at Carretera de Pozuelo 52,
Majadahonda 28222, Madrid, Spain.
MAPFRE MIDDLESEA p.l.c.
Annual Report - 31 December 2022
198
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report
To the Shareholders of MAPFRE Middlesea p.l.c.
1 Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of MAPFRE Middlesea p.l.c. (the
“Company”) and of the Group, of which the Company is the parent, which
comprise the statements of financial position as at 31 December 2022, the
statements of profit or loss, technical account - general business, technical
account - long term business, profit or loss - non-technical account,
comprehensive income, changes in equity and cash flows for the year then
ended, and notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying financial statements:
a.give a true and fair view of the financial position of the Company and of the
Group as at 31 December 2022, and of their financial performance and their
cash flows for the year then ended in accordance with International Financial
Reporting Standards (“IFRS”) as adopted by the EU; and
b.have been properly prepared in accordance with the provisions of the
Companies Act, 1995 (Chapter 386, Laws of Malta) (the “Act”) and the
Insurance Business Act, 1998 (Chapter 403, Laws of Malta) (the “Insurance
Business Act”) and, additionally, specifically in relation to those of the Group,
with the requirements of article 4 of the Regulation on the application of IFRS
as adopted by the EU.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(“ISAs”). Our responsibilities under those standards are further described in the
Auditors’ responsibilities for the audit of the financial statements section of our
report. We are independent of the Company and the Group in accordance with
the International Ethics Standards Board for Accountants’ International Code of
Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code), together with the ethical requirements that are
relevant to our audit of the financial statements in accordance with the
Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in
terms of the Accountancy Profession Act (Chapter 281, Laws of Malta) (“APA”),
and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of
most significance in our audit of the financial statements of the current period
(selected from those communicated to the audit committee), and include a
description of the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by us, including those which had the
greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
We summarise below the key audit matters, together with our response by way of
the audit procedures we performed to address those matters in our audit, and key
observations arising with respect to such risks of material misstatement.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Key audit matters (continued)
Estimates for insurance claim provisions in relation to general business
Accounting policy note 2.14 to the financial statements and notes 3, 4.1 and 24
for further disclosures
‘Outstanding claims – general business’ (“OSC”) (€54,167 thousand) included in
‘Technical provisions’
The Company enters into insurance contracts which expose it to the uncertainty
surrounding the amount of claims reserved resulting on the occurrence of insured
events whether reported or yet to be reported. We have considered the estimate
of OSC as a key audit matter in view of the subjectivity surrounding: (i) the
ultimate cost of claims; and (ii) the judgement applied by the claims handling
personnel in determining the claim amount, based on the information as it
becomes available, also having regard to the nature of the claim, and the
incurred but not yet reported claims.
Due to the degree of such inherent estimation uncertainty underlying the
calculation of OSC, the amounts recognised in the statement of financial position
may result to be different from those settled.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Key audit matters (continued)
Estimates for insurance claim provisions in relation to general business
(continued)
Our response
As part of our procedures, we evaluated the appropriateness of the Company’s
assumptions applied in estimating the OSC and their quantum. Our evaluation
considered industry norms, as well as our industry knowledge and experience, in
performing substantive procedures, which included:
–involving our actuarial specialist, in assessing the appropriateness of the
Company's assumptions to develop the ultimate cost of claims of the motor
OSC (excluding the motor business addressed in the below procedure) and,
evaluating the amount recorded based on our analysis of the data elements;
and
–in relation to the remaining motor OSC and OSC arising from the other lines
of general business, evaluating samples of such claims to assess the basis
of the estimates, and evaluating the appropriateness of the Company’s
assumptions underlying the incurred but not yet reported claims assessment.
Key observation
We have no key observations to report, specific to this matter.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Key audit matters (continued)
Actuarial assumptions underlying the calculations of the (a) ‘long term
business provision’ (“LTBP”) relating to term business; and (b) ‘value of in
force business’ (“VIF”) in relation to business carried out by the main
subsidiary of the group MAPFRE MSV Life p.l.c. (MMSV)
Accounting policy note 2.4 and 2.14 to the financial statements and notes 3, 16 and 24 for
further disclosures
LTBP relating to the term business within ‘Technical provisions’ (€2,064,259
thousand for all business, inclusive of the term business); and VIF (€79,837
thousand) included in ‘Intangible assets’
MMSV enters into insurance contracts which comprise term, unit-linked and
participating (with-profits) business. For term business, the obligation of MMSV is
the payment of a death benefit, where such an event occurs during the period the
policy is in force. Within the amounts reported under ‘Technical provisions’, we
have considered the LTBP relating to the term business as a key audit matter in
view of the judgement involved in estimating the ultimate total settlement value
(therefore subject to significant actuarial assumptions). Due to inherent
estimation uncertainty, the outcomes of the estimated outflows (being the ultimate
total settlement value) in relation to long-term business provisions (“LTBP”) on
the non-participating business (term business), may be different from the
amounts provided.
Also, as part of its intangible assets, MMSV recognises the discounted value of
projected future transfers to shareholders from those insurance contracts and the
investment contracts in force at the end of the reporting period, net of deferred
tax. The determination of this VIF also involves judgement.
The judgement involved relates, in the main, to actuarial assumptions which
impact the LTBP relating to the term business and the VIF. Those assumptions
comprise both economic assumptions (namely, valuation rate of interest (“VIR”),
inflation, risk discount rate and the investment return), and non-economic
(operating) assumptions (namely, mortality and lapse rates).
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Key audit matters (continued)
Actuarial assumptions underlying the calculations of the (a) ‘long term
business provision’ (“LTBP”) relating to term business; and (b) ‘value of in
force business’ (“VIF”) in relation to business carried out by the main
subsidiary of the group MAPFRE MSV Life p.l.c. (MMSV) (continued)
Our response
As part of our procedures, we involved our actuarial specialist to assess the
appropriateness of the following key assumptions underlying the calculations of
the actuarial elements:
Economic assumptions
–We assessed the VIR against the regulatory valuation rules as used for
accounting purposes. We have also assessed whether the VIR derivation: (i)
took into account the critical factors impacting the portfolio yield; and (ii) is
consistent with the relevant regulations.
–Specifically in relation to the LTBP calculations, we assessed the
appropriateness of the inflation assumption, as to whether the expense
inflation was set in accordance with the applicable valuation rules, by
considering the movements in Malta’s Consumer Price Index, published by
the National Office of Statistics, and the economic forecasts prepared by the
Central Bank of Malta.
–Specifically in relation to the VIF calculation, we assessed whether: (i) the
assumptions underlying the risk discount rate, the investment return and
inflation are set in line with MMSV’s long-term expectations; and (ii) MMSV’s
approach in determining the assumptions in line with MMSV’s long-term
expectations, for the purpose of the VIF calculation, reflects industry practice.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Key audit matters (continued)
Actuarial assumptions underlying the calculations of the (a) ‘long term
business provision’ (“LTBP”) relating to term business; and (b) ‘value of in
force business’ (“VIF”) in relation to business carried out by the main
subsidiary of the group MAPFRE MSV Life p.l.c. (MMSV) (continued)
Non-economic assumptions
–We assessed MMSV’s best estimate mortality assumptions against observed
data in light of its experience in recent years and compared such
assumptions to those used in MMSV’s computation of the actuarial results for
accounting purposes.
–Specifically, in relation to the VIF calculation, we assessed the
appropriateness of MMSV’s best estimate lapse assumptions, through the
evaluation of observed data over recent years.
–Specifically, in relation to expense assumptions, we assessed the
appropriateness of the maintenance expense allocation through the
evaluation of the methodology underlying the maintenance expense
allocation.
Key observation
We have no key observations to report, specific to this matter.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Key audit matters (continued)
Valuation of Investment property
Accounting policy note 2.6 to the financial statements and note 3 and 19 for
further disclosures
‘Investment property’ (Group: €108,278 thousand; and Company: €13,404
thousand)
As part of its investment strategy, the Group and Company hold freehold and
leasehold properties as investment property. The valuation of such investment
property at its fair value is subject to significant judgement. Such judgement
revolves around assumptions underlying the determination of fair value as at the
reporting date. We have considered the valuation of investment property as a key
audit matter in view of the subjectivity surrounding the judgement applied and our
audit focus on this area.
Our response
We gained an understanding of the Group and Company's valuation methodology
and assumptions used in estimating the fair value of the investment property as
at the reporting date. As part of our procedures, we involved our valuation
specialist to develop a possible range of values appropriate to such property,
having regard to their earnings potential and compared these values to those
recorded by the Group and Company.
Key Observations
We have no key observations to report, specific to this matter.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Other information
The directors are responsible for the other information which comprises:
–the ‘Chairman’s Statement’;
–the ‘President & Chief Executive Officer’s Statement’;
–the ‘Directors’ Report’;
–the ‘Corporate Governance - Statement of Compliance’; and
–the ‘Remuneration Committee’s Statement to the Shareholders’,
but does not include the financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and,
other than in the case of the directors’ report on which we report separately below
in our ‘Opinion on the Directors’ Report’, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to
read the other information, and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Responsibilities of the directors for the financial statements
The directors are responsible for the preparation of financial statements that (a)
give a true and fair view in accordance with IFRS as adopted by the EU, and (b)
are properly prepared in accordance with the provisions of the Act and the
Insurance Business Act, and, additionally, specifically in relation to those of the
Group, with the requirements of article 4 of the Regulation on the application of
IFRS as adopted by the EU. The directors are also responsible for such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing
the Company’s and the Group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Company
and/or the Group or to cease operations, or have no realistic alternative but to do
so.
The directors are also responsible for overseeing the financial reporting process.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditors’ report that includes our opinion. ‘Reasonable
assurance’ is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgement
and maintain professional scepticism throughout the audit.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Auditors’ responsibilities for the audit of the financial statements
(continued)
We also:
•Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
•Consider the extent of compliance with those laws and regulations that
directly affect the financial statements, as part of our procedures on the
related financial statement items. For the remaining laws and regulations, we
make enquiries of directors and other management, and inspect
correspondence with the regulatory authority, as well as legal
correspondence. As with fraud, there remains a higher risk of non-detection
of other irregularities (whether or not these relate to an area of law directly
related to the financial statements), as these may likewise involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal
controls.
•Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s
and the Group’s internal control.
•Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Auditors’ responsibilities for the audit of the financial statements
(continued)
•Conclude on the appropriateness of the directors’ use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s and the Group's ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditors’ report. However, future events or conditions may cause
the Company and/or the Group to cease to continue as a going concern.
•Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves
fair presentation.
•Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express
an opinion on the financial statements of the Group. We are responsible for
the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the audit committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide the audit committee with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with
them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Auditors’ responsibilities for the audit of the financial statements
(continued)
From the matters communicated with the audit committee, we determine those
matters that were of most significance in the audit of the financial statements of
the current period and are therefore the key audit matters. We describe these
matters in our auditors’ report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
2 Opinion on the Directors’ Report
The directors are responsible for preparing a directors’ report in accordance with
the provisions of article 177 of the Act and other applicable legal requirements,
and is to include a statement that the Company is a going concern with
supporting assumptions or qualifications as necessary, as required by Capital
Markets Rule 5.62 issued by the Listing Authority in Malta.
We are required to consider whether the information given in the directors’ report
for the accounting period for which the financial statements are prepared is
consistent with those financial statements; and, if we are of the opinion that it is
not, we shall state that fact in our report. We have nothing to report in this
regard.
Pursuant to article 179(3) of the Act, we are also required to:
•express an opinion on whether the directors’ report has been prepared in
accordance with the applicable legal requirements; and
•state whether, in the light of the knowledge and understanding of the entity
and its environment obtained in the course of our audit of the financial
statements, we have identified material misstatements in the directors’ report,
giving an indication of the nature of any such misstatements.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
2 Opinion on the Directors’ Report (continued)
Pursuant to Capital Markets Rule 5.62 of the Capital Markets Rules issued by the
Listing Authority in Malta, we are required to review the directors’ statement in
relation to going concern.
In such regards:
•in our opinion, the directors’ report has been prepared in accordance with the
applicable legal requirements;
•we have not identified material misstatements in the directors’ report; and
•we have nothing to report in relation to the statement on going concern.
3 Report on Other Legal and Regulatory Requirements
Matters on which we are required to report by the Act, specific to public-
interest entities
Pursuant to article 179B(1) of the Act, we report as under matters not already
reported upon in our ‘Report on the Audit of the Financial Statements’:
•we were first appointed as auditors by the shareholders on 15 July 2015, and
subsequently reappointed at the Company’s general meetings for each
financial year thereafter. The period of total uninterrupted engagement is
eight years;
•our opinion on our audit of the financial statements is consistent with the
additional report to the audit committee required to be issued by the Audit
Regulation (as referred to in the Act); and
•we have not provided any of the prohibited services as set out in the APA.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Matters on which we are required to report by exception by the Act
Pursuant to articles 179(10) and 179(11) of the Act, we have nothing to report to
you with respect to the following matters:
•proper accounting records have not been kept; or
•the financial statements are not in agreement with the accounting records; or
•we have not obtained all the information and explanations which, to the best
of our knowledge and belief, we require for the purpose of our audit.
Report on compliance with the requirements of the Commission Delegated
Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “ESEF
Regulation”), by reference to Capital Markets Rule 5.55.6 issued by the
Listing Authority
We have undertaken a reasonable assurance engagement in accordance with
the requirements of Directive 6 issued by the Accountancy Board in terms of the
Accountancy Profession Act, 1979 (Chapter 281, Laws of Malta), the
Accountancy Profession (European Single Electronic Format) Assurance
Directive, on the Group’s Annual Report for the year ended 31 December 2022,
prepared in a single electronic reporting format.
Responsibilities of the directors for compliance with the requirements of the
ESEF Regulation
As required by Capital Markets Rule 5.56A, the directors are responsible for the
preparation of the Annual Report in XHTML format, including the specified mark-
ups, in accordance with the requirements of the ESEF Regulation.
In addition, the directors are responsible for such internal control as they
determine is necessary to enable the preparation of the Annual Report that is in
compliance with the requirements of the ESEF Regulation.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
Portico Building
Marina Street
Pietà
PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Auditors’ Report (continued)
To the Shareholders of MAPFRE Middlesea p.l.c.
Auditors’ responsibilities to report on compliance with the requirements of the
ESEF Regulation
Our responsibility is to obtain reasonable assurance about whether the Annual
Report in XHTML format, including the specified mark-ups, comply in all material
respects with the ESEF Regulation based on the evidence we have obtained.
In discharging that responsibility, we:
•obtain an understanding of the entity's financial reporting process, including
the preparation of the Annual Report, in accordance with the requirements of
the ESEF Regulation;
•perform validations to determine whether the Annual Report has been
prepared in accordance with the requirements of the technical specifications
of the ESEF Regulation; and
•examine the information in the Annual Report to determine whether all the
required mark-ups therein have been applied and whether, in all material
respects, they are in accordance with the requirements of the ESEF
Regulation.
We believe that the evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Opinion
In our opinion, the Annual Report for the year ended 31 December 2022 has
been prepared, in all material respects, in accordance with the requirements of
the ESEF Regulation, by reference to Capital Markets Rule 5.55.6.
The Principal authorised to sign on behalf of KPMG on the audit resulting in this
independent auditors’ report is Thane Micallef.
KPMG 22 March 2023
Registered Auditors
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Assurance Report
To the Shareholders of Mapfre Middlesea p.l.c
Report required by Capital Markets Rules 5.98 and 12.26N issued by the
Malta Financial Services Authority (the “MFSA”)
We were engaged by the Directors of Mapfre Middlesea p.l.c.(the “Company”) to
report on the disclosures of specific elements in the Corporate Governance
Statement and the Remuneration Report (the “Disclosures”) as at 31 December
2022, in the form of an independent reasonable assurance conclusion, as to
whether they are, in all material respects, in compliance with the corporate
governance regulations and information to be provided in the Remuneration
Report set out in the Capital Markets Rules issued by the MFSA (the “Capital
Market Rules”). More specifically, we are required to report on the Disclosures in
the form of an independent reasonable assurance conclusion about whether:
a.in light of our knowledge and understanding of the Company and its
environment obtained in the course of the statutory audit, we have identified
material misstatements with respect to the information referred to in Capital
Markets Rules 5.97.4 (dealing with the Company’s internal control and risk
management systems in relation to the financial reporting process) and
5.97.5 (where a takeover bid applies). Where material misstatements are
identified in relation to those requirements, we shall, in addition to our
conclusion, provide an indication of the nature of such misstatements;
b.the Disclosures include the other information required by Capital Markets
Rule 5.97, insofar as it is applicable to the Company; and
c.the Disclosures include the information required by Appendix 12.1,
‘Information to be provided in the Remuneration Report’, to Chapter 12 of the
Capital Markets Rules (as applicable).
Responsibilities of the Directors
The Directors are responsible for preparing and presenting the Disclosures that
are free from material misstatement in accordance with the requirements of the
Capital Market Rules and for the information contained therein.
This responsibility includes designing, implementing and maintaining internal
control as they determine is necessary to enable the preparation and
presentation of the Disclosures that are free from misstatement, whether due to
fraud or error.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Assurance Report
To the Shareholders of Mapfre Middlesea p.l.c (continued)
Responsibilities of the Directors (continued)
The Directors are also responsible for preventing and detecting fraud and for
identifying and ensuring that the Company complies with laws and regulations
applicable to its activities. The Directors are responsible for ensuring that
personnel involved in the preparation and presentation of the Disclosures are
properly trained, systems are properly updated and that any changes in reporting
relevant to the Disclosures encompass all significant business units.
Our Responsibilities
Our responsibility is to examine the Disclosures prepared by the Company and to
report thereon in the form of an independent reasonable assurance conclusion
based on the evidence obtained. We conducted our engagement in accordance
with International Standard on Assurance Engagements 3000 (Revised),
Assurance Engagements Other Than Audits or Reviews of Historical Financial
Information (“ISAE 3000”) issued by the International Auditing and Assurance
Standards Board. That standard requires that we plan and perform our
procedures to obtain reasonable assurance about whether the Disclosures are
properly prepared and presented, in all material respects, in accordance with the
requirements set out in the relevant Capital Markets Rules.
The firm applies International Standard on Quality Management 1, which requires
the firm to design, implement and operate a system of quality management
including policies or procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
We have complied with the independence and other ethical requirements of the
International Ethics Standards Board for Accountants’ International Code of
Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code), together with the ethical requirements that are
relevant to our assurance engagement in accordance with the Accountancy
Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the
Accountancy Profession Act (Chapter 281, Laws of Malta), and we have fulfilled
our other ethical responsibilities in accordance with these requirements and the
IESBA Code. The IESBA Code is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality and
professional behavior.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Assurance Report
To the Shareholders of Mapfre Middlesea p.l.c (continued)
Our Responsibilities (continued)
The procedures selected and our determination of the nature, timing and extent
of those procedures, will depend on our judgment, including the assessment of
the risks of material misstatement of the preparation and presentation of the
Disclosures whether due to fraud or error.
In making those risk assessments, we have considered internal control relevant
to the preparation and presentation of the Disclosures in order to design
assurance procedures that are appropriate in the circumstances, but not for the
purposes of expressing a conclusion as to the effectiveness of the Company’s
internal control over the preparation and presentation of the Disclosures.
Reasonable assurance is less than absolute assurance.
We are not required to, and we do not, consider whether the Directors’
statements on internal control and risk management systems cover all the risks
and controls in relation to the financial reporting process or form an opinion on
the effectiveness of the Company’s corporate governance procedures or its risks
and control procedures, nor on the ability of the Company to continue in
operational existence. Our opinion in relation to the disclosures pursuant to
Capital Markets Rules 5.97.4 and 5.97.5 (as appropriate) is based solely on our
knowledge and understanding of the Company and its environment obtained in
forming our opinion on the audit of the financial statements.
As part of this engagement, we have not performed any procedures by way of
audit, review or verification of the Disclosures nor of the underlying records or
other sources from which the Disclosures were extracted.
Other Information
We also read the other information included in the Annual Report that contains
the Disclosures, and our report thereon, in order to identify material
inconsistencies, if any, with the Disclosures. We have nothing to report in this
regard.
KPMG, a Maltese civil partnership and a member firm of the KPMG global The firm is registered as a A list of partners and directors of
organisation of independent member firms affiliated with KPMG partnership of Certified Public the firm is available at Portico
International Limited, a private English company limited guarantee.Accountants in terms of the Building, Marina Street, Pietà,
Accountancy Profession Act PTA9044, Malta.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone(+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
Independent Assurance Report
To the Shareholders of Mapfre Middlesea p.l.c (continued)
Conclusion
Our conclusion has been formed on the basis of, and is subject to, the matters
outlined in this report.
We believe that the evidence we have obtained is sufficient and appropriate to
provide a basis for our conclusion.
In our opinion:
a.in light of our knowledge and understanding of the Company and its
environment obtained in the course of the statutory audit, we have not
identified material misstatements with respect to the information requirements
referred to in Capital Markets Rules 5.97.4 and 5.97.5;
b.the Disclosures include the other information required by Capital Markets
Rule 5.97; and,
c.the Disclosures include the information required by Appendix 12.1 to Chapter
12 of the Capital Markets Rules.
The Principal authorised to sign on behalf of KPMG on the work resulting in this
assurance report is Thane Micallef.
KPMG 22 March 2023
Registered Auditors
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