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LifeStar Insurance p.l.c. – Annual Financial Report 2023
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LifeStar Insurance p.l.c. – Annual Financial Report 2023

| Pages
Chairman and CEO statement | 3 - 5
Managing Director’s Report - LifeStar Insurance Limited | 6
Directors’ report | 7 - 9
Statement of directors’ responsibilities | 10 - 11
Corporate Governance – Statement of compliance | 12 - 20
Remuneration report | 21 - 24
Statement of comprehensive income | 25 - 26
Statement of financial position | 27 - 29
Statement of changes in equity | 30 - 33
Statement of cash flows | 34 - 36
Material accounting policies | 37 - 86
Notes to the financial statements | 87 - 164
Independent auditor’s report | 165 - 174

Chairman and CEO Statement - LifeStar Insurance plc
3
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Dear Shareholders, Policyholders and Stakeholders,
Year 2023 has been both a successful and a challenging year for our company.
LifeStar Insurance plc registered a profit before tax of €1.8 million compared to a restated loss before tax of €3.9 million. The Insurance Group registered a profit before tax for 2023 of €1.6 million as against a loss in 2022 of €4.0 million.
The total group assets increased by Euro 10 million to Euro 145 million at the end of 2023.
The mandated changes in reporting standard from IFRS 4 to IFRS 17 proved to be a challenge during the year. IFRS 17 “Insurance Contracts” became effective for the period starting on 1 January 2023, with having to re-state 2022 under this new standard. The company planned the move well in advance and, in 2021 it purchased the best-in-class software system: the IFRS 17 Analyser from Oracle. Unfortunately, we suffered a vendor failure after one year and we had to engage another Oracle Partner to proceed with the implementation. Because of the provider change and because of technical challenges due to the volume of data to be reconfigured in a new and untested actuarial environment, a series of delays were cumulated, resulting in the late publication of the financial statements. The management is now confident that such delays will not be experienced in the future.
What changes to our financial statements has this standard brought about? To simplify some highly technical insurance parameters we saw the elimination of the Value of in-force Business, the technical Provisions and the Re-Insurance’ share of Technical Provisions. Such posts were replaced by Reinsurance Contracts Assets, Insurance Contract Liabilities and Investment Contract Liabilities. The net change of all these new calculations resulted in our retained earnings to be restated from €5.8 million under IFRS 4 at the end of 2022 to €14.5 million in 2023 under IFRS 17.
Chairman and CEO Statement - LifeStar Insurance plc (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
Beside the technical challenges, our company also had to face the very complex geopolitical scenarios present across the globe. During 2023, Supply chains were disrupted predominately due the continued Ukraine Russia conflict coupled with the middle-east flair up. The world followed with caution the different monetary policies applied across Europe to curb the rising inflation. Our investment strategy also had to be entirely redefined, following the decision of the main Central Banks across the world to increase interest rates.
The European Central Bank (ECB) raised interest rates six times during 2023 with indications that high rates will stay in place in the foreseeable future.
Figure 1: Main refinancing operations - fixed rate tenders (fixed rate)
Acknowledging the economic headwinds LifeStar continued to overcome the challenges and fostered growth in the different areas of the business. The company also confirms that it has met its solvency capital requirements throughout the year under review.
Our company has also embarked in a long-term effort to positively contributing to the climate change. Our group companies are determined to implement the highest Environmental, Social and Governance (ESG) standards. An ESG committee has been appointed to overview the implementation of measures such as an overall strategic initiative to become carbon neutral by looking at measures to reduce energy consumption through the introduction of energy efficient measures in our Head Office, reduce our dependency on paper through more digital sustainable technologies and invest in ESG friendly instruments.
Good governance and compliance is also at the core of our activity and of our values and the company is determined to continuously improve its standards. From a governance perspective, we have appointed another Independent Director Mr. Jean Paul Fabri as Executive Director to have an independent look at our structures and procedures with the aim to strengthen our overall governance.
Chairman and CEO Statement - LifeStar Insurance plc (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
LifeStar is also committed to help our clients, employees and stakeholders to live a healthy lifestyle. Our marketing and communication campaigns in 2023 and 2024 conveyed that message. LifeStar Insurance plc was the main sponsor of the anticipated Malta Marathon held on 25 February 2024. The Marathon has grown to be a major annual event which attracted over 3,000 participants, including athletes from 70 different countries. It was particularly exciting to see how the community joined together for this race which ultimately benefited Inspire Foundation Malta, a local charity that aims to assist anyone with a disability. A hearty congratulations to the winners and record-breaking participants. Quite a few of our employees took part in the walkathon.
The new image of LifeStar was launched in late 2020 and during 2023 we continued to solidify the brand both through local campaigns and also through international sponsorships. We once again participated in a very prestigious event held in America by The National Italian American Foundation (www.niaf.org), besides a number of local NGOs.
2024 will be another very promising year., which will see the company’ expansion to other markets and a substantial growth in revenue.
The positive results of this year and our future initiatives are primarily due to the dedication and loyalty of our 60 strong employees and of our dedicated tied-insurance intermediaries). They are the lifeblood of this group that has continued to increase its local market presence and it is now looking at further growth.
LifeStar Insurance remains an attractive and reliable investment – even in times of great uncertainty and change.
Profs Paolo Catalfamo Roberto Apap Bologna
Chairman LifeStar Insurance Group Acting CEO LifeStar Insurance Group
08 July 2024
Managing Director’s Report - LifeStar Health Limited
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2023 has been another good year for LifeStar Health Ltd. The following tiles or high-level numbers are self-explanatory, and I am very proud of this performance!
This is the first year whereby total commissions earned from normal operations have exceeded the EUR1 million mark whereas total commissions receivable, including profit commission, amounts to EUR2 million.
Earnings before interest, tax and amortisation (EBITA) for the year increased by 33% on last year from EUR370K in 2022 to EUR491K in 2023.
LifeStar Health Ltd once again declared an interim dividend of EUR500 thousand. This is the third year in succession that a dividend has been paid to LifeStar Insurance plc. The excess in own funds closed off the year with an overall surplus of EUR258K over and above the required own funds (schedule to chapter 4 of the Insurance Distribution Rules).
We look at 2024 with cautious optimism. The current sentiment is that inflation has been brought under control and it is expected that within 2024 we will start seeing reduction in the various reference interest rates. This could be an opportunity to further increases in business. The Bupa brand has been in Malta for over 50 years which is something we are very proud of and treasure. We were the pioneers of the health insurance in Malta.
It is our primary vision and creed to provide both individuals and companies with a healthcare insurance service that is second to none. I would like to express my sincere thanks to all the team, who have given their all in 2023.
Adriana Zarb Adami
Managing Director of LifeStar Health Limited
8 July 2024
Directors’ report
7
LifeStar Insurance p.l.c. – Annual Financial Report 2023
The Directors present the annual report and the consolidated audited financial statements of LifeStar Insurance p.l.c. (the “Company”) and its subsidiary LifeStar Health Limited (“LifeStar Health”) for the year ended 31 December 2023. The Company and LifeStar Health shall hereinafter jointly be referred to as the “Group” or “Insurance Group”.
Principal activities
The Company and LifeStar Health are licensed by the Malta Financial Services Authority (“MFSA”) to carry out long term business of insurance under the Insurance Business Act and the Insurance Distribution Act respectively.
Review of business
The Insurance Group – Consolidated results
2023 was another challenging year for the insurance group due to the introduction of the new accounting standards. We registered some very good results with a profit before tax for the insurance group of €1.6 million compared to a restated loss in 2022 of €4.0 million.
LifeStar Insurance p.l.c.
The financial statements being presented are under IFRS 17.
LifeStar Insurance plc (LSI) registered a profit before tax of €1.8 million compared to a loss of €3.9 million. This is mainly due to the improved investment performance and to the major changes that IFRS 17 has brought about. In 2023 we have continued to see a strong demand for the pension related products with funds under management increasing from €32.0 million in 2022 to €46.7 million in 2023 or a 45.9% increase. Protection related premium has remained flat on the previous year at €6.1 million.
Insurance revenues have also increased by 2.5% when compared to 2022 to close off at €5.6 million (2022 restated: €5.5 million). Insurance service results closed off 2023 at €2.3 million compared to €1.4 million in restated 2022. Net insurance financial results also saw a good improvement over the previous year to close at €3.0 million when compared to 2022 restated of a loss of €2.8 million.
Administrative expenses increased by €1.2M over the same period last year to close at €4.2 million when compared to restated 2022 of €3 million. This increase is mainly due to higher administrative and shared service fees.
As explained under the Chairman’s and CEO’s joint statement one of the main impact of IFRS 17 on LSI was the impact on retained earnings that has increased to €14.5 million in 2023 from an IFRS 4 position in 2022 of €5.8 million. The significance of this change is that most of the retained earnings are distributable reserves as these are mainly due to releases from the technical provisions that existed under the IFRS 4 standard.
In 2023 LifeStar Health Limited declared a net interim dividend of €500K (2022: net dividend €500K).
Total assets of LSI increased by €10 million when compared to the restated previous year to close off at €144 million. Total liabilities increased by €7.9 million when compared to restated 2022 mainly due to the increase in Insurance contract liabilities which increased by €8 million. Total equity also increased over the prior period by €1.4 million being mainly the profit after tax for the year.
The Board of directors approved a 2022 bonus declaration of 3.5% for Money Plus policies (2022: 3.5%) and 1.0% (2022: 0.5%) for all other interest sensitive products. The Company also announced a bonus rate of 0.5% (2022: 0.5%) for paid up policies.
Directors’ report (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
Review of business (continued)
LifeStar Health Limited
The Company registered a profit before tax of €0.5 million (2022: €0.4 million), revenue increased by €137K in 2023 to €1.9 million (2022: €1.8 million) or a 7.5% increase. Total direct costs increased by €26K in 2023 whereas administrative and other expenses decreased by €11K leading to an overall increase in total costs of €15K.
Total assets increased by €326K to close off at €2.3 million when compared to €2.0 million in 2022. Total equity reduced by €186K to close off at just under €1 million compared to 2022 of €1.2 million, mainly due to the distribution of the dividend. Total liabilities increased by €512K to close off at €1.4 million. This increase is mainly due to the declared dividend that had not been paid by 31 December 2023.
LifeStar Health Limited is required to comply with the own funds requirement as set by the Malta Financial Services Authority. The minimum capital requirements (defined as “the capital resource requirements”) must be maintained at all times throughout the year. LifeStar Health Limited monitors its capital level through detailed reports compiled with management accounts. Any transactions that may potentially affect LifeStar Health Limited’s regulatory position are immediately reported to the directors for resolution prior to notifying the Malta Financial Services Authority. The Company exceeded the required minimum capital requirements during the year under review at all times.
Future outlook
The Directors intend to continue to operate in line with the Group’s current business plan.
Principal risks and uncertainties
The Group’s principal risks and uncertainties are further disclosed in Note 1 – Critical accounting estimates and judgements, Note 2 – Management of insurance and financial risk, and Note 14 – Investment property and assets held for sale disclosing the significant observable inputs.
Financial risk management
Note 2 to the financial statements provides details in connection with the Group’s use of financial instruments, its financial risk management objectives and policies and the financial risks to which it is exposed.
Results and dividends
The statement of comprehensive income sets out the results of the Group and the Company. The profit for the year after taxation was €1.01 million (2022 restated: loss €2.33 million). No dividends were declared during the year under review (2022: Nil) at the Company level, however a net dividend of €0.5 million was declared by LifeStar Health Limited.
Events after the reporting date
As we progress through 2024, certain events which might have the potential of impacting the results of the holding company and the group are possible repercussions from the war in Ukraine on the European and, more generally, on the world economy as well as rising inflation and stock market uncertainty. Other concerns could arise from another possible pandemic flareup although the latter is considered unlikely in the short term as vaccinations have been administered on a large scale globally.
Post the end of the reporting date however, as aforementioned, the potential risks to the performance of any company is from high inflation witnessed in the last few months which has forced many major central banks to increased interest rates as a counter-measure for inflation we have started seeing signs of interest reductions though inflation still remains volatile.
Directors’ report (continued)
9
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Events after the reporting date (continued)
So far, Malta has been well shielded from increases in fuel and utility prices, though the Government has hinted that this may not be sustainable in the longer term. We have also seen increased pressure from the EU on a possible removal of these subsidies. Should the government halt its subsidies on energy and other assistance to industry in general, this could lead to further price increases and possibly a reduction in disposable income, which would adversely influence the propensity to save.
To date we have not seen any impact on the level of business being written with us. Our next challenge is now to increase efficiency even further to mitigate as much as possible the effect of rising prices but also with a view to help in protecting the environment in line with national targets and efforts done by industry as well as our peers.
We are not otherwise aware of any further events that could possibly have an effect on the operations of the LifeStar Insurance Group.
Going concern
The Directors, as required by Capital Markets Rule 5.62, have considered the Group’s operating performance, the statement of financial position at year end, as well as the business plan for the coming year, and they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Directors
The Directors of the Company who held office during the period were:
Prof. Paolo Catalfamo
Mr. Joseph C. Schembri
Mr. Mark J. Bamber
Mr. Jean Paul Fabri (appointed on 2 August 2023)
Mr. Andreas Shakallis (appointed on 14 July 2023)
Ms. Cristina Casingena (resigned on 25 August 2023)
Mr. Joseph M. Rizzo (resigned on 19 June 2023)
In terms of Article 117 of the Articles of Association, the term of appointment of the Directors still in office expires at the end of the forthcoming Annual General Meeting.
The Directors are required in terms of the Company’s Articles of Association to retire at the forthcoming Annual General Meeting and shall be automatically eligible for re-election by the Company in general meeting, without the need for nomination.
Remuneration Committee and corporate governance
The Board of Directors has set up an Audit and Risk Committee, as well as a Remuneration and Nominations Committee. The Board of the Company will be submitting to the Shareholders at the next Annual General Meeting the Remuneration Report for the financial year ending 31 December 2023 (the “Reporting Period”). The Remuneration Report is drawn up in accordance with, and in fulfilment of the provisions of Chapter 12 of the Capital Markets Rules issued by the Malta Financial Services Authority (“Capital Markets Rules”) relating to the Remuneration Report and Section 8A of the Code of Principles of Good Corporate Governance (Appendix 5.1 of the Capital Market Rules) regarding the Remuneration Statement.
Statement of directors’ responsibilities
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
The Directors are required by the Insurance Business Act (Cap. 403 of the Laws of Malta) and the Companies Act (Cap. 386 of the Laws of Malta) to prepare financial statements which give a true and fair view of the state of affairs of the Group as at the end of each financial year and of the profit or loss for that year.
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 (IFRS’s) as adopted by the EU;
•selecting and applying appropriate accounting policies;
•making accounting estimates that are reasonable in the circumstances; and
•ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Group will continue in business as a going concern.
The Directors are also responsible for designing, implementing and maintaining internal controls relevant to the preparation and the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Insurance Business Act (Cap. 403 of the Laws of Malta) and the Companies Act (Cap. 386 of the Laws of Malta). They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In addition, the Directors are required to ensure that the Company has, at all times, complied with and observed the various requirements of the Insurance Business Act (Cap. 403 of the Laws of Malta) and that LifeStar Health Limited has, at all times, complied with and observed the various requirements of the Insurance Distribution Act (Cap. 487 of the Law of Malta).
Information provided in accordance with Capital Markets Rule 5.70.1
There were no material contracts to which the Company, or its subsidiary was a party, and in which anyone of the Company’s Directors was directly or indirectly interested.
Auditors
Grant Thornton have intimated their willingness to continue in office.
A resolution to reappoint Grant Thornton as auditor of the Company will be proposed at the forthcoming annual general meeting.
Information provided in accordance with Capital Markets Rule 5.64
The authorised share capital of the Company is fifty million Euro (€50,000,000) divided into three hundred and fifty three million, four hundred and eleven thousand, nine hundred and forty two (353,411,942) ordinary shares of fourteen Euro cents (€0.141478) each share.
The issued share capital of the Company is nine million, one hundred and sixty nine thousand, eight hundred and seventy Euro and sixty eight cents (€9,169,870) divided into sixty four million, eight hundred and fourteen thousand, eight hundred and seventeen (64,814,817) ordinary shares of fourteen Euro cents (€0.141478) each share, which have been subscribed for and allotted fully paid-up.
The issued shares of the Company consist of one (1) class of ordinary shares with equal voting rights attached. The shares carry equal rights to participate in any distribution of dividends declared by the Company. Each share shall be entitled to one (1) vote at the meetings of the shareholders. The shares are freely transferable in accordance with the rules and regulations of the Malta Stock Exchange, as applicable from time to time, and in terms of the provisions of the Articles of Association of the Company.
The Directors confirm that as at 31 December 2023, LifeStar Holding p.l.c., and GlobalCapital Financial Management Limited (as nominee for client accounts), held a shareholding in excess of 5% of the total issued share capital.
Statement of directors’ responsibilities (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
Information provided in accordance with Capital Markets Rule 5.64 (continued)
The Nominations and Remuneration Committee of the Board of Directors currently consists solely of Non-Executive Directors. It has the responsibility to assist and advise the Board of Directors on matters relating to the remuneration of the Board of Directors and senior management, in order to motivate and retain executives and ensure that the Company is able to attract the best talents in the market in order to maximise shareholder value.
The rules governing the appointment and replacement of the Company’s Directors are contained in Articles 107 to 124 of the Company’s Articles of Association. Directors of the Company are elected on an individual basis by ordinary resolution of the Company in general meeting. The order of priority of the said ordinary resolutions shall be determined and decided by lot. The Company may, in accordance with article 140 of the Companies Act (Cap. 386 of the Laws of Malta) remove a Director by ordinary resolution taken at a general meeting at any time prior to the expiration of his term of office, if any.
The Directors can only issue shares following an extraordinary resolution passed in the Annual General Meeting. This and other powers vested in the Company’s Directors are confirmed in Articles 132 to 142 of the Company’s Articles of Association.
It is hereby declared that as at 31 December 2023, the information required under Capital Markets Rules 5.64.4, 5.64.5, 5.64.6, 5.64.7, 5.64.10 and 5.64.11 is not applicable to the Company.
Information pursuant to Capital Markets Rule 5.70.2
The Company Secretary is Dr Clinton Calleja and the registered office is LifeStar Insurance p.l.c., Testaferrata Street, Ta’ Xbiex, Malta.
Statement by the Directors 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 applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its subsidiaries included in the consolidation taken as a whole, and that this Director’s report includes a fair review of the 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 Board of Directors on 08 July 2024 by Prof Paolo Catalfamo (Chairman) and Mr. Joseph C Schembri (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Corporate Governance – Statement of compliance
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
Introduction
Pursuant to the Capital Markets Rules issued by the Malta Financial Services Authority, the Company whose equity securities are listed on a regulated market should endeavour to adopt the Code of Principles of Good Corporate Governance (“the Code”) as contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules. In terms of the Capital Markets Rules, the Company is hereby reporting on the extent of its adoption of the Code.
The Company acknowledges that the Code does not prescribe mandatory rules but recommends principles so as to provide proper incentives for the Board of Directors (“the Board”) and the Company’s management to pursue objectives that are in the interests of the Company and its shareholders. Good corporate governance is the responsibility of the Board, and in this regard the Board has carried out a review of the Company’s compliance with the Code during the period under review, and hereby provides its report thereon.
As demonstrated by the information set out in this statement, the Company believes that during the reporting period, it has been in full compliance with the Code.
Compliance with the Code
Principles One and Four: The Board
The Directors report that for the financial year under review, the Directors have provided the necessary leadership in the overall direction of the Company and have performed their responsibilities for the efficient and smooth running of the Company with honesty, competence and integrity. The Company is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations.
Directors, individually and collectively, are of appropriate calibre, with the necessary skill and experience to assist them in providing leadership, integrity and judgement in directing the Company towards the maximisation of shareholder value and to make an effective contribution to the leadership and decision-making processes of the Company as reflected by the Company’s strategy and policies. In fact, the Board comprises of a number of individuals, all of whom have extensive knowledge of insurance. Members of the Board are selected on the basis of their core competencies and professional background in the industry so as to ensure the continued success of the Company.
All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company. The Board is accountable for its performance and that of its delegates to shareholders and other relevant stakeholders.
Its responsibilities also involve the oversight of the Company’s internal control procedures and financial performance, and the review of business risks facing the Company, ensuring that these are adequately identified, evaluated, managed and minimised. The activities of the Board are exercised in a manner designed to ensure that it can effectively supervise the operations of the Company and protect the interests of bondholders, external borrowers and the shareholders.
The Company has a structure that ensures a mix of executive and non-executive directors and that enables the Board to have direct information about the Company’s performance and business activities.
Corporate Governance – Statement of compliance (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principles One and Four: The Board (continued)
All directors are required to:
•Exercise prudent and effective controls which enable risk to be assessed and managed in order to achieve continued prosperity to the Company;
•Be accountable for all actions or non-actions arising from discussion and actions taken by them or their delegates;
•Determine the Company’s strategic aims and the organisational structure;
•Regularly review management performance and ensure that the Company has the appropriate mix of financial and human resources to meet its objectives and improve the economic and commercial prosperity of the Company;
•Acquire a broad knowledge of the business of the Company;
•Be aware of and be conversant with the statutory and regulatory requirements connected to the business of the Company;
•Allocate sufficient time to perform their responsibilities; and
•Regularly attend meetings of the board
In terms of the Capital Markets Rules 5.117 – 5.134 the Board has established an Audit committee to monitor the Company’s present and future operations, threats and risks in the external environment and current and future strengths and weaknesses. The Audit committee ensures that the Company has the appropriate policies and procedures in place to ensure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical standards. The Audit committee has a direct link to the board and is represented by the Chairman of the Audit committee in all Board meetings.
Principle Two: Chairman and Chief Executive Officer
In compliance with the provisions of this Principle, the functions of the Chairman and the CEO of the Company are segregated from one another. Prof. Paolo Catalfamo occupies the post of Chairman whilst Ms. Cristina Casingena occupies the post of CEO.
The responsibilities and roles of the Chairman and the Chief Executive Officer are clearly established and agreed to by the Board of Directors.
The Chairman is responsible to:
•Lead the board and set its agenda;
•Ensure that the directors of the board receive precise, timely and objective information so that they can take sound decisions and effectively monitor the performance of the company;
•Ensure effective communication with shareholders; and
•Lead and pursue initiatives to consolidate and growing the organisation, including internationally;
•Encourage active engagement by all members of the board for discussion of complex or contentious issues.
Principle Three: Composition of the Board
In accordance with the provisions of the Company’s Articles of Association, the appointment of Directors to the Board is exclusively reserved to the Company’s shareholders, except in so far as appointment is made to fill a casual vacancy on the Board, and which appointment would expire at the Company’s Annual General Meeting following appointment. Any vacancy among the Directors may be filled by the co-option of another person to fill such vacancy. Such co-option shall be made by the Board of Directors.
Corporate Governance – Statement of compliance (continued)
14
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principle Three: Composition of the Board (continued)
The Board has the overall responsibility for the activities carried out within the Company and the Group and thus decides on the nature, direction, strategy and framework of the activities and sets the objectives for the activities.
The Board is composed of five (5) Directors (one (1) of whom is the Chairman), with four (4) being non-executive Directors and one being an executive Director. The present mix of executive and non-executive directors is considered to create a healthy balance and serves to unite all stakeholders’ interests, whilst providing direction to the Company’s management to help maintain a sustainable organisation.
The non-executive directors constitute a majority on the Board and their main functions are to monitor the operations of the Chief Executive Officer and the performance of the occupier of the role. For the purpose of Capital Markets Rules 5.118 and 5.119, Mr Mark J Bamber, Mr Joseph C Schembri, Mr Andreas Shakallis and Mr Jean Paul Fabri are the non-executive directors which are deemed independent. Each director is mindful of maintaining independence, professionalism and integrity in carrying out his duties, responsibilities and providing judgement as a director of the Company.
The Board considers that none of the independent directors of the Company:
•Are or have been employed in any capacity by the Company;
•Have or have had, over the past three years, a significant business relationship with the Company;
•Have received or receives significant additional remuneration from the company in addition to its director’s fee;
•Have close family ties with any of the company’s executive directors or senior employees; and
•Have been within the last three years an engagement partner or a member of the audit team or past external auditor of the company.
Each of the directors hereby declares that he undertakes to:
•Maintain in all circumstances his independence of analysis, decision and action;
•Not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and
•Clearly express his opposition in the event that he finds that a decision of the board may harm the company.
The Board of Directors is currently chaired by Prof. Paolo Catalfamo. The Company Secretary (Dr. Clinton Calleja) attends all meetings and takes minutes. Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good information flows between the Board of Directors and its Committees and between senior management and the Directors, as well as ensuring that the Board of Directors’ procedures are followed. The Company’s Articles of Association also provide for adequate controls and procedures in so far as the treatment of conflicts of interest during Board of Directors meetings is concerned.
The Articles of Association of the Company clearly set out the procedures to be followed in the appointment of directors. The following Directors served on the Board during the period under review:

Prof. Paolo Catalfamo | Executive Director
Mr. Joseph C. Schembri | Independent, Non-executive Director
Mr. Mark J. Bamber | Independent, Non-executive Director
Mr. Andreas Shakallis | Independent, Non-executive Director
Mr. Jean Paul Fabri | Independent Non-Executive Director

Corporate Governance – Statement of compliance (continued)
15
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principle Five: Board Meetings
The Directors meet regularly to dispatch the business of the Board. The Directors are notified of forthcoming meetings by the Company Secretary with the issue of an agenda and supporting Board papers, which are circulated in advance of the meeting. Board Meeting are also convened at short notice, from time-to-time, depending on the urgency, with which the items of the agenda would require Board discussion. Minutes are prepared during the Board meetings recording inter alia attendance, and resolutions taken at the meeting. The Chairman ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all Directors every opportunity to contribute to relevant issues on the agenda. The agenda for the meeting seeks to achieve a balance between long-term strategic and short-term performance issues.
The Board of Directors meets in accordance with a regular schedule of meetings and reviews and evaluates the Group’s strategy, major operational and financial plans, as well as new material initiatives to be undertaken by the Group. The Board of Directors meets formally at least once every quarter and at other times on an ‘as and when’ required basis.
During the period under review, the Board of Directors met sixteen (16) times. The following Directors attended Board meetings as follows:

| Meetings
Prof. Paolo Catalfamo | 15
Mr. Joseph C. Schembri | 16
Mr. Mark J. Bamber | 16
Mr. Andreas Shakallis (appointed 14th July 2023) | 9
Mr. Jean Paul Fabri (appointed 02nd August 2023) | 7
Mr. Joseph M. Rizzo (retired from office 19th June 2023) | 6
Ms. Cristina Casingena (resigned on 25 August 2023) | 8

Principle Six: Information and Professional Development
The Company ensures that it provides directors with relevant information to enable them to effectively contribute to Board decisions. The Company Secretary ensures effective information flows within the Board, committees and between senior management and Directors, as well as facilitating professional development. The Company Secretary advises the Board through the Chairman on all governance matters.
Directors may, in the course of their duties, take independent professional advice on any matter at the Company’s expense. The Company will provide for additional individual Directors' training on a requirements basis.
The Chief Executive Officer ensures that systems are in place:
1.to provide for the development and training of the management and employees generally so that the Company remains competitive;
2.to provide additional training for individual Directors where necessary;
3.to monitor management and staff morale; and
4.to establish a succession plan for senior management.
Corporate Governance – Statement of compliance (continued)
16
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principle Seven: Evaluation of the Board’s Performance
The Chairman of the Board informally evaluates the performance of the Board members, which assessment is followed by discussions within the Board. Through this process, the activities and working methods of the Board and each committee member are evaluated. Amongst the things examined by the Chairman through his assessment are the following: how to improve the work of the Board further, whether or not each individual member takes an active part in the discussions of the Board and the committees; whether they contribute independent opinions and whether the meeting atmosphere facilitates open discussions. Under the present circumstances the Board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role as the Board’s performance is furthermore also under the scrutiny of the shareholders. On the other hand, the performance of the Chairman is evaluated by the Board of Directors of the ultimate controlling party, taking into account the manner in which the Chairman is appointed. The self-evaluation of the Board has not led to any material changes in the Company’s governance structures and organisations.
Principle Eight: Committees
Audit and Risk Committee
The Board of Directors delegates certain responsibilities to the Audit Committee, the terms of reference of which reflect the requirements stipulated in the Capital Markets Rules. As part of its terms of reference, the Audit Committee has the responsibility to vet, approve, monitor and scrutinise any related party transactions falling within the ambits of the Capital Markets Rules, and to make its recommendations to the Board of Directors on any such proposed related party transactions. The Audit Committee also assists the Board of Directors in monitoring and reviewing the Group’s financial statements, accounting policies and internal control mechanisms in accordance with the Committee’s terms of reference.
The primary purpose of the Audit Committee is to protect the interests of the Company’s shareholders and assist the Directors in conducting their role effectively so that the Company’s decision-making capability and the accuracy of its reporting and financial results are maintained at a high level at all times. In the performance of its duties the Audit Committee calls upon any person it requires to attend meetings. The external auditors of the Company are invited to attend relevant meetings in order to report on key matters arising from the audit. The internal auditors are also invited to attend certain meetings of the Audit Committee, as necessary, in order to report directly any findings of their audit process. The head of legal and compliance, as well as the compliance officers of the regulated subsidiaries are also invited to participate during meetings of the Audit Committee to present their compliance reports. In addition, the Audit Committee invites the Acting Chief Financial Officer and other members of management to attend Audit Committee meetings on a regular basis and as deemed appropriate.
The Audit Committee also approves and reviews the Group’s Compliance Plan and Internal Audit Plan prior to the commencement of every financial year and monitors the implementation of these plans. The remit of the Audit Committee was also extended to include group risk management, and it is also referred to as the Audit and Risk Committee.
The Audit Committee is directly responsible and accountable to the Board. During the financial year under review, the Audit Committee undertook the below mentioned number of meetings:

Members | Committee meetings attended
Joseph Schembri | 10
Mark J. Bamber | 9
Joseph M. Rizzo [retired from office 19th June 2023] | 5
Andreas Shakallis [appointed 14th July 2023] | 5

Corporate Governance – Statement of compliance (continued)
17
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principle Eight: Committees (continued)
Audit and Risk Committee (continued)
The Audit Committee is chaired by Joseph C. Schembri, who is an auditor by profession, and is considered to be an independent non-executive member possessing the necessary competence in auditing and accounting as required in terms of the Capital Markets Rules. All the members that served on the Audit Committee were deemed by the Board of Directors to be Independent Non-Executive Directors, and the Board of Directors felt that as a whole the Audit Committee had the necessary skills, qualifications and experience in satisfaction of the Capital Markets Rules.
The terms of reference of the Audit Committee include, inter alia, its support to the Board of the Company in its responsibilities in dealing with issues of risk management, control and governance and associated assurance. The Board has set formal terms that establish the composition, role , function, the parameters of the Audit Committee’s remit as well as the basis for the processes that it is required to comply with. The Terms of Reference of the Audit Committee, which were approved by the Malta Financial Services Authority, are modelled on the principles set out in the Capital Markets Rules themselves.
Principally, the Audit Committee deals with and advises the Board on the following matters:
•its monitoring responsibility over the financial reporting processes, financial policies and internal control structures;
•monitoring the performance of the entity or entities borrowing funds (the subsidiaries) from the Company;
•maintaining communications on such matters between the Board, management and the independent auditors;
•facilitating the independence of the external audit process and addressing issues arising from the audit process; and
•preserving the Company’s assets by understanding the risk environment and determining how to deal with those risks.
In addition, the Audit Committee has the role and function of scrutinising and evaluating any proposed transaction prior to be entered into by the Company and a related party, to ensure that the execution of any such transaction is at arm's length and on a commercial basis and ultimately in the best interests of the Company. The Audit committee oversees the financial reporting of the Company and ensures the process takes place in a timely manner. The Committee is free to question the Board of Directors on any information that may seem unclear.
Nominations and Remuneration Committee
The Board of Directors has appointed a Nominations and Remuneration Committee, which fulfils the joint-function of a Nominations Committee as well as a Remuneration Committee. In fulfilling the nominations’ function, the Committee is responsible for recommending Directors for election by shareholders at the Annual General Meeting, for planning the structure, size, performance and composition of the Group’s subsidiary boards, for the appointment of senior executives and management and for the development of a succession plan for senior executives and management.
During the financial year under review, the Nominations and Remuneration Committee met three (3) times and was composed of Joseph Del Raso as Chairman, and Joseph Schembri and Gregory Eugene McGowan as members.
Corporate Governance – Statement of compliance (continued)
18
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principle Eight: Committees (continued)
Nominations and Remuneration Committee (continued)
Remuneration Function
The Remuneration and Nomination Committee monitors, reviews, and advises on the Company’s remuneration policy as well as approves the remuneration packages of senior executives and management. The main activities of the Remuneration and Nomination Committee include devising appropriate policies and remuneration packages to attract, retain, and motivate Directors and senior management of a high calibre in order to well position the Group within the insurance market and its areas of business.
In the fulfilment of its remuneration matters oversight, the Committee monitors, reviews and advises on the Group’s Remuneration Policy, as well as approves the remuneration packages of senior executives and Management.
Nominations Function
The Remuneration and Nominations Committee is also responsible for making recommendations for appointment to the Board and for reviewing in order to ensure that appointments to the Boards are conducted in a systematic, objective and consistent manner. It is also responsible for the review of performance of the Company’s Board members and committees, the appointment of senior executives and management and the development of a succession plan for senior executives and management. Additionally, this committee monitors, reviews and advises on the Company’s remuneration policy as well as approves the remuneration packages of senior executives and management.
Executive Management Committee
The Executive Management Committee manages the Group’s day-to-day business and the implementation of the strategy established by the Board of Directors. The Executive Management Committee as at 31 December 2023 was composed of the Managing Directors of each of the operating regulated subsidiaries of the Group, as well as of the Chief Financial Officer, the Chief Information Officer, the Chief Operations Officer and Risk and the Head of Legal and Compliance.

Members | Role
Roberto Apap Bologna | Chief Executive Officer LifeStar Holding p.l.c. and Acting Chief Executive Officer LifeStar Insurance plc
Adriana Zarb Adami | Managing Director LifeStar Health Limited
Konrad Camilleri | Managing Director GlobalCapital Financial Management Limited
Amanda Mifsud | Acting Chief Financial Officer
Adrian Mizzi | Chief Information Officer
Jonathan Camilleri | Chief Operations Officer
Michael Schembri | Head Legal and Compliance

Corporate Governance – Statement of compliance (continued)
19
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Compliance with the Code (continued)
Principle Eight: Committees (continued)
Internal controls
The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The Company has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve its objectives.
The Group encompasses different licensed activities regulated by the MFSA. These activities include the carrying on of long-term business of insurance under the Insurance Business Act (Cap. 403 of the Laws of Malta); acting as an agent for sickness and accident insurance in terms of the Insurance Distribution Act (Cap. 487 of the Laws of Malta); and the provision of investment services and advice in terms of the Investment Services Act (Cap. 370 of the Laws of Malta). The Board of Directors has continued to ensure that effective internal controls and processes are maintained to support sound operations. The regulated subsidiaries have also set up Committees to further enhance internal controls and processes. These include the setting up of an Executive Committee, Asset and Liability Committee and the Risk Management Committee at life company level. Policies such as Risk Compliance Monitoring Programmes, Risk Management, Complaints, Data Protection, Internal Audit and Anti-Money Laundering Policies and Procedures as well as a Conflict of Interest Policy have been adopted.
The Directors are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against normal business risks. During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Company.
The Company has implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include physical controls, segregation of duties and reviews by management, internal audit and the external auditors. The Internal Audit Department monitors and reviews the Group’s compliance with policies, standards and best practice in accordance with an Internal Audit Plan approved by the Audit Committee. KPMG fulfil the functions of internal auditors of the Company.
Principle Nine and Ten: Relations with Shareholders and with the Market, and Institutional Shareholders
The Company recognises the importance of maintaining a dialogue with its shareholders and of keeping the market informed to ensure that its strategies and performance are well understood. During the period under review, the Company has maintained an effective communication with the market through a number of channels, including Company announcements and Circulars.
The Company shall also communicate with its shareholders through the Company’s Annual General Meeting (“AGM”) to be held later in 2024, which will include resolutions such as the approval of the Annual Report and Audited Financial Statements for the year ended 31 December 2023, the election/re-election of Directors, the determination of the maximum aggregate emoluments that may be paid to Directors, the appointment of auditors and the authorisation of the Directors to set the auditors’ remuneration, as well as any other resolution as may necessary in terms of law, the Capital Markets Rules, or as required by the Company. In terms of Rule 12.26L of the Capital Markets Rules, an annual general meeting shall have the right to hold an advisory vote on the remuneration report of the most recent financial year. Both the Chairman of the Board and the Chairman of the Audit Committee will be available to answer shareholder questions, which may be put forward in terms of Rule 12.24 of the Capital Markets Rules.
Apart from the AGM, the Group communicates and shall communicate with its shareholders through the publication of its Annual Report and Financial Statements, the publication of interim results, updates and articles on the Group’s website, the publication of Group announcements and press releases.
Corporate Governance – Statement of compliance (continued)
20
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Principle Nine and Ten: Relations with Shareholders and with the Market, and Institutional Shareholders (continued)
The Office of the Company Secretary is also available to act as a liaison of communication between the Company and its investors. Individual shareholders can raise matters relating to their shareholdings and the business of the Company at any time throughout the year, and are given the opportunity to ask questions at the AGM or to submit written questions in advance.
As provided by the Companies Act (Cap. 386), minority shareholders may convene Extraordinary General Meetings.
Principle Eleven: Conflicts of Interest
The Directors are fully aware of their responsibility always to act in the best interests of the Company and its shareholders as a whole irrespective of whoever appointed or elected them to serve on the Board.
On joining the Board and regularly thereafter, the Directors are informed of their obligations on dealing in securities of the Company within the parameters of law, including the Capital Markets Rules, and Directors follow the required notification procedures.
Directors’ direct interest in the shareholding of the Company:

| Number of shares held directly as at 31 December 2023
Prof. Paolo Catalfamo | Nil
Mr. Joseph Schembri | Nil
Mr. Mark J. Bamber | Nil
Mr. Andreas Shakallis [appointed 14th July 2023] | Nil
Mr. Jean Paul Fabri [appointed 02nd August 2023] | Nil
Mr. Joseph M. Rizzo [retired from office 19th June 2023] | Nil
Ms. Cristina Casingena [resigned 25th August 2023] | Nil

With the exception of Paolo Catalfamo, none of the Directors of the Company have any interest in the shares of the Company’s subsidiaries or investees or any disclosable interest in any contracts or arrangements either subsisting at the end of the last financial year or entered into during this financial year. No other changes in the Directors’ direct interest in the shareholding of the Company between year-end and the audit date of the approval of the financial statements.
Paolo Catalfamo holds shares in the Company indirectly through his shareholding in Investar plc which is the Company’s ultimate holding company as disclosed in Note 30.
Remuneration report
21
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Remuneration Committee
The remuneration functions of the Remuneration and Nominations Committee were performed by Mark Bamber as Chairman, and Joseph C. Schembri and Jean-Paul Fabri as members.
Remuneration policy
The Company’s remuneration of its Directors and senior executives is based on the remuneration policy adopted and approved by the shareholders of the Company at the annual general meeting. The Remuneration Policy of the Company is available for inspection on the Company’s website. During the latest general meeting held on 19 June 2023 the meeting approved the Remuneration Statement published as part of the annual report of the Company for the financial year ended 31 December 2023.
The Remuneration Policy of the Company is intended to provide an over-arching framework that establishes the principles and parameters to be applied in determining the remuneration to be paid to any member of the Board of Directors, and the senior executives. The policy describes the components of such remuneration and how this contributes to the Company’s business strategy, in the context of its long term sustainable value creation. This remuneration policy is divided into five (5) parts distinguishing between directors, senior management, employees, intermediaries and service providers.
Remuneration payable to Directors
Fixed remuneration
The remuneration payable to Directors is fixed and does not have any incentive programmes and Directors will therefore not receive any performance-based remuneration. None of the Directors, in their capacity as Directors of the Company, is entitled to profit-sharing, share options or pension benefits.
In addition to fixed remuneration in respect of their position as members of the Board of Directors of the Company, individual Directors who are also appointed to chair, or to sit as members of, one or more committees or sub-committees of the Company, or its subsidiaries, are entitled to receive additional remuneration as may be determined by the Board of Directors from time to time. Any such additional remuneration shall, however, form part of the aggregate emoluments of the Directors as approved by the General Meeting of the Company. The basis upon which such additional remuneration is paid shall take into account the skills, competencies and technical knowledge that members of such committees require and the respective functions, duties and responsibilities attaching to membership of such committees.
Other entitlements
The Company may also pay out fringe benefits, comprising of medical and life insurance.
Director Employment Service Contracts
Ms. Cristina Casingena who was the only executive Director of the Company and occupied the role of Chief Executive Officer, having an employment service contract resigned from her position as Chief Executive Officer of the Company with effect from 25th August 2023. Mr Roberto Apap Bologna, Chief Executive Officer of LifeStar Holdings was appointed as Interim Chief Executive Officer of the Company however he was not appointed as a Board Member.
Remuneration report (continued)
22
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Remuneration payable to executives
•Chief Executive Officer: The remuneration of the Chief Executive Officer will consist of a salary, and any performance related bonuses and any fringe benefits will be at the sole discretion of the Chairman and submitted for approval of the Remuneration and Nominations Committee. The Chairman (directly or through the Chief Finance Officer) will forward any recommendations for any changes to the remuneration of the Chief Executive Officers for the consideration of the Remuneration and Nominations Committee which will in turn review any such request and forward any request to the Board for the Board’s final approval. Ms Cristina Casingena occupied the roles of Managing Director and Chief Executive Officer up till her resignation.
•Head/Senior Manager: The remuneration of the Head / Senior Managers will be at the sole discretion of the Chairman and/or the Chief Executive Officer without the need to refer to the Remuneration and Nominations Committee or the Board of Directors subject that the remuneration does not exceed a yearly remuneration of Fifty Thousand Euros (€50,000). Any amount over this threshold will require the endorsement of the Remuneration Committee.
Senior executive service contracts
All senior executive contracts are of an indefinite duration and subject to the termination notice periods prescribed by law.
Remuneration Report
In terms of Rule 12.26K of the Capital Markets Rules, the Company is also required to draw up an annual remuneration report (the “Remuneration Report”), which report is to:
i.provide an overview of the remuneration, including benefits in whatever form, awarded or due to members of the Board of Directors and the CEO during the financial year under review; and
ii.explain whether any deviations have been made from the Remuneration Policy of the Company.
In this respect, the Company is hereby producing its remuneration report following the approval and entry into effectiveness, in October 2020, of the Remuneration Policy described in the preceding sections.
Remuneration paid to Directors (including the CEO)
All remuneration for directors was in conformity with this policy. The remuneration paid to individual Directors during the year under review was as follows:

Name | Position | 2023 | 2022
|  | € | €
Paolo Catalfamo: | Executive Director and Chairman | 158,683 | 42,825
Joseph C Schembri: | Independent Non-Executive Director | 28,800 | 8,993
Joseph M Rizzo: | Independent Non-Executive Director | 13,000 | 18,000
Mark J Bamber: | Independent Non-Executive Director | 23,000 | 15,000
Jean-Paul Fabri | Independent Non-Executive Director | 9,500 | -
Andreas Shakallis | Independent Non-Executive Director | 10,688 | -

Remuneration report (continued)
23
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Senior executive service contracts
Remuneration paid to Directors (including the CEO) (continued)
The total emoluments received by the Chief Executive Officer, who is also an Executive Director for the financial years 2023 and 2022 were as follows:

| 2023 | 2022
| Fixed | Variable | Fixed | Variable
| € | € | € | €
Ms. Cristina Casingena | 69,083 | - | 100,512 | -

The remuneration paid to the Directors covers both their role as directors of Company and their role as members of chairpersons or members of any sub-committees of the Company, as well as their position as directors of subsidiaries forming part of the Group.
It is the shareholders, in terms of the memorandum and articles of association of the company, who determine the maximum annual aggregate emoluments of the directors by resolution at the annual general meeting of the company. Remuneration payable to directors (in their capacity as directors) is reviewed as and when necessary and is not linked to the share price or the company’s performance. These are benchmarked against market practice for major local companies of similar size and complexity.
The aggregate amount fixed for this purpose during the last annual general meeting of LifeStar Insurance plc was €390,000. A maximum annual aggregate emoluments of the Directors of the Company shall be fixed at the upcoming Annual General Meeting.
The aggregate emoluments of the Directors (including the CEO) in respect of their role as directors of the Company and, where applicable, as members of sub-committees of the Board of Directors of the Company and non-executive directors of LifeStar Health Limited, amounted to €330,954. No variable remuneration is paid to Directors in their capacity as Directors of the Company. The Directors do not expect the abovementioned maximum aggregate remuneration limit of €390,000 to be exceeded during the financial year ending 31 December 2024.
The Remuneration Committee is satisfied that the fixed remuneration for the year under review is in line with the core principles of the Remuneration Policy applicable during the year under review, including giving due regard to market conditions and remuneration rates offered by comparable organisations for comparable roles.
Remuneration paid to Senior Management
Remuneration paid to Senior Management amounts to €622,689 and excludes the fringe benefit for health insurance and life cover as described above.
Decision-making with respect to the Remuneration Policy
Whereas the Board of Directors is responsible for determining the Remuneration Policy of the Company, the Remuneration and Nominations Committee, acting in its function as the Remuneration Committee, is, in turn, responsible for overseeing and monitoring its implementation and ongoing review thereof. This policy is to be reviewed annually by the Remuneration and Nominations Committee of the Company. The annual review will ensure that the policy remains relevant for the Company and that any improvements by way of amendments are indeed affected.
Remuneration report (continued)
24
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Decision-making with respect to the Remuneration Policy (continued)
In evaluating whether it is necessary or beneficial to supplement or otherwise alter the Remuneration Policy of the Company, the Remuneration Committee have regard to, inter alia, best industry and market practice on remuneration, the remuneration policies adopted by companies operating in the same industry sectors, as well as legal and, or statutory rules, recommendations or guidelines on remuneration, including but not limited to the Code of Principles of Good Corporate Governance contained in Appendix 5.1 of the Capital Markets Rules of the Malta Financial Services Authority.
Whilst members of the Remuneration Committee may be present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed at a meeting of such Committee, any decision taken by the Committee in this respect shall be subject to the approval of the Board of Directors. At a meeting of the Board of Directors, no Director may be present while his/her remuneration as a Director or other officer of the Company and, or of any other company forming part of the Group, is being discussed.
Other information on remuneration in terms of Appendix 12.1 of the Capital Markets Rules
In terms of the requirements within Appendix 12.1 of the Capital Market Rules, the following table presents the annual change of remuneration, of the company’s performance, and of average remuneration on a full-time equivalent basis of the company’s employees (other than directors) over the two most recent financial years. The Company’s non-executive Directors, have been excluded from the table below since they have a fixed fee as described above.

Position | 2023 | 2022 | Change
| € | € | %
Annual aggregate employee remuneration | 1,766,200 | 972,144 | +82
Employee remuneration (excluding CEO) | 1,677,434 | 861,277 | +94
CEO remuneration | 88,766 | 100,512 | -12
Company performance, profit after tax (restated balance) | 1,371,271 | (2,064,443) | +166
Average employee remuneration (excluding CEO) – full-time equivalent | 38,123 | 23,924 | +59

The contents of the Remuneration Report have been reviewed by the external auditor to ensure that the information required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets rules have been included.
Statement of comprehensive income
For the year ended 31 December
25
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Consolidated
Holding Company
Notes
2023
2022
2023
2022
(restated)
(restated)
€
€
€
€
Insurance revenue
3.1
5,638,941
5,501,155
5,638,941
5,501,155
Insurance service expense
3.2
(1,903,944)
(2,852,591)
(1,903,944)
(2,852,591)
Insurance service result from insurance contracts issued
3,734,997
2,648,564
3,734,997
2,648,564
Allocation of reinsurance premiums paid
3.3
(2,284,581)
(1,941,196)
(2,284,581)
(1,941,196)
Amounts recovered from reinsurers
3.3
885,840
724,900
885,840
724,900
Net expense from reinsurance contracts held
(1,398,741)
(1,216,296)
(1,398,741)
(1,216,296)
Insurance service result
2,336,256
1,432,268
2,336,256
1,432,268
Net investment income
4
7,911,890
(11,197,538)
8,411,890
(10,697,538)
Interest income on financial asset at amortised cost
6
675,265
642,137
675,265
642,137
Net movement in provision for expected credit losses
252,677
-
252,677
-
Insurance finance income/ expense from insurance contracts issued
3.4
(7,967,056)
8,006,497
(7,967,056)
8,006,497
Reinsurance finance income/ expense from reinsurance contracts held
3.4
787,355
(1,535,724)
787,355
(1,535,724)
Movement in investments contract liabilities
795,094
777,717
795,094
777,717
Net insurance financial result
2,455,225
(3,306,911)
2,955,225
(2,806,911)
Commissions and fees receivable
5
1,794,598
1,826,882
-
-
Other income
844,258
579,526
824,377
557,333
Administrative and other expenses
7
(5,755,440)
(4,457,929)
(4,255,886)
(2,973,687)
Finance cost
8
(97,252)
(96,962)
(97,252)
(96,962)
Profit / (loss) before tax
1,577,645
(4,023,126)
1,762,720
(3,887,959)
Income tax expense
(567,158)
1,688,706
(391,449)
1,823,516
Profit / (loss) for the year
1,010,487
(2,334,420)
1,371,271
(2,064,443)

Profit / (loss) per share (cents) | 1.6 | (3.6) | 2.1 | (3.2)

Statement of comprehensive income (continued)
For the year ended 31 December
26
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Consolidated
Holding Company
Notes
2023
2022
2023
2022
(restated)
(restated)
€
€
€
€
Profit / (loss) for the year
1,010,487
(2,334,420)
1,371,271
(2,064,443)
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of property
44,292
(75,597)
44,292
(75,597)
Total other comprehensive income
44,292
(75,597)
44,292
(75,597)
Total comprehensive (loss) income for the year
1,054,779
(2,410,017)
1,415,563
(2,140,040)
The accounting policies and explanatory notes form an integral part of the financial statements.
Statement of financial position
As at 31 December
27
LifeStar Insurance p.l.c. – Annual Financial Report 2023

|  |  | Consolidated |  |  | Holding Company |
| Notes | 2023 | 2022 (restated) | 1 January 2022 (restated) | 2023 | 2022 (restated) | 1 January 2022 (restated)
|  | € | € | € | € | € | €
ASSETS |  |  |  |  |  |  |
Intangible assets | 11 | 3,568,193 | 2,649,738 | 2,243,025 | 3,216,534 | 2,297,412 | 1,911,391
Right-of-use asset | 12 | 9,925 | 1,530 | 7,650 | 9,925 | 1,530 | 7,650
Property, plant and equipment | 13 | 3,590,744 | 3,616,256 | 3,585,900 | 3,588,201 | 3,614,508 | 3,584,779
Investment property | 14 | 15,851,439 | 15,835,731 | 16,208,895 | 15,851,439 | 15,835,731 | 16,208,895
Investment in group undertakings | 15 | - | - | - | 1,048,218 | 1,048,218 | 1,048,218
Other investments | 16 | 96,977,456 | 87,429,204 | 91,219,726 | 96,977,456 | 87,429,204 | 91,219,726
Taxation receivable |  | 338,568 | 611,245 | 346,110 | 321,899 | 595,285 | 346,110
Deferred tax asset | 21 | 1,236,986 | 1,645,016 | - | 1,236,986 | 1,645,016 | -
Reinsurance contract assets | 3.5 | 2,565,601 | 2,610,911 | 4,360,536 | 2,565,601 | 2,610,911 | 4,360,536
Receivables: |  |  |  |  |  |  |
-Trade and other receivables | 17 | 12,609,335 | 12,471,991 | 13,159,733 | 12,847,431 | 12,728,799 | 13,006,471
-Prepayments and accrued income | 17 | 3,529,224 | 2,682,768 | 1,596,514 | 2,939,699 | 2,087,408 | 1,596,514
Cash and cash equivalents | 25 | 4,921,302 | 5,962,294 | 11,494,899 | 3,497,079 | 4,851,135 | 9,886,689
Asset held-for-sale | 14 | - | - | 190,002 | - | - | 190,002
Total assets |  | 145,198,773 | 135,516,684 | 144,412,990 | 144,100,468 | 134,745,157 | 143,366,981

Statement of financial position (continued)
As at 31 December
28
LifeStar Insurance p.l.c. – Annual Financial Report 2023

|  |  | Consolidated |  |  | Holding Company |
| Notes | 2023 | 2022 (restated) | 1 January 2022 (restated) | 2023 | 2022 (restated) | 1 January 2022 (restated)
|  | € | € | € | € | € | €
Liabilities |  |  |  |  |  |  |
Insurance contract liabilities | 3.5 | 105,163,291 | 97,188,780 | 103,686,727 | 105,163,291 | 97,188,780 | 103,686,727
Investment contract liabilities |  | 5,419,502 | 5,337,019 | 4,919,948 | 5,419,502 | 5,337,019 | 4,919,948
Lease liability | 12 | 9,457 | 1,780 | 13,391 | 9,457 | 1,780 | 13,391
Taxation payable |  | 3,635,490 | 3,626,898 | 3,665,532 | 3,528,006 | 3,527,997 | 3,527,997
Deferred tax liability | 21 | 1,496,212 | 1,494,266 | 1,669,703 | 1,487,190 | 1,488,529 | 1,668,480
Debt securities in issue | 22 | 2,182,945 | 2,144,949 | 2,105,257 | 2,182,945 | 2,144,949 | 2,105,257
Payables: |  |  |  |  |  |  |
-Payables due to immediate parent undertaking | 23 | 33,134 | 33,919 | 70,674 | - | - | -
-Other payables | 23 | 582,902 | 101,878 | 153,169 | 54,413 | 101,878 | 153,169
Accruals and deferred income | 23 | 849,823 | 815,957 | 947,334 | 336,919 | 451,043 | 648,790
Total liabilities |  | 119,372,756 | 110,745,446 | 117,231,735 | 118,181,723 | 110,241,975 | 116,723,759

Statement of financial position (continued)
As at 31 December
29
LifeStar Insurance p.l.c. – Annual Financial Report 2023

|  |  | Consolidated |  |  | Holding Company |
| Notes | 2023 | 2022 (restated) | 1 January 2022 (restated) | 2023 | 2022 (restated) | 1 January 2022 (restated)
|  | € | € | € | € | € | €
Capital and reserves |  |  |  |  |  |  |
Share capital | 18 | 9,169,870 | 9,169,870 | 9,169,870 | 9,169,870 | 9,169,870 | 9,169,870
Other reserves | 20 | 1,572,988 | 1,528,696 | 1,604,293 | 1,409,807 | 1,365,515 | 1,441,112
Capital redemption reserve |  | 800,000 | 800,000 | 800,000 | 800,000 | 800,000 | 800,000
Retained earnings |  | 14,283,159 | 13,272,672 | 15,607,092 | 14,539,068 | 13,167,797 | 15,232,240
Total equity |  | 25,826,017 | 24,771,238 | 27,181,255 | 25,918,745 | 24,503,182 | 26,643,222
Total equity and liabilities |  | 145,198,773 | 135,516,684 | 144,412,990 | 144,100,468 | 134,745,157 | 143,366,981

The accompanying notes are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 08 July 2024. The financial statements were signed on behalf of the Board of Directors by Prof. Paolo Catalfamo (Director) and Mr Joseph Schembri (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Statement of changes in equity
For the year ended 31 December
30
LifeStar Insurance p.l.c. – Annual Financial Report 2023
The Group

| Share capital | Other reserves | Capital redemption reserve | Retained earnings | Total
| € | € | € | € | €
Restated balance as at 1 January 2023 | 9,169,870 | 1,528,696 | 800,000 | 13,272,672 | 24,771,238
Profit for the year | - | - | - | 1,010,487 | 1,010,487
Other comprehensive gain for the year | - | 44,292 | - | - | 44,292
Total comprehensive gain/(loss) for the year | - | 44,292 | - | 1,010,487 | 1,054,779
Dividend declared | - | - | - | - | -
Balance as at 31 December 2023 | 9,169,870 | 1,572,988 | 800,000 | 14,283,159 | 25,826,017

Statement of changes in equity (continued)
For the year ended 31 December
31
LifeStar Insurance p.l.c. – Annual Financial Report 2023
The Group (continued)

| Share capital | Other reserves | Capital redemption reserve | Retained earnings | Total
| € | € | € | € | €
Balance as at 1 January 2022 | 9,169,870 | 13,138,946 | 800,000 | 9,055,099 | 32,163,915
Impact of initial application of IFRS 17 | - | (11,534,653) | - | 6,551,993 | (4,982,660)
Restated balance as at 1 January 2022 | 9,169,870 | 1,604,293 | 800,000 | 15,607,092 | 27,181,255
Loss for the year | - | - | - | (2,334,420) | (2,334,420)
Other comprehensive gain for the year | - | (75,597) | - | - | (75,597)
Total comprehensive gain/(loss) for the year | - | (75,597) | - | (2,334,420) | (2,410,017)
Dividend declared | - | - | - | - | -
Balance as at 31 December 2022 | 9,169,870 | 1,528,696 | 800,000 | 13,272,672 | 24,771,238

Statement of changes in equity (continued)
For the year ended 31 December
32
LifeStar Insurance p.l.c. – Annual Financial Report 2023
The Company

| Share capital | Other reserves | Capital redemption reserve | Retained earnings | Total
| € | € | € | € | €
Restated balance as at 1 January 2023 | 9,169,870 | 1,365,515 | 800,000 | 13,167,797 | 24,503,182
Profit for the year | - | - | - | 1,371,271 | 1,371,271
Other comprehensive gain for the year | - | 44,292 | - | - | 44,292
Total comprehensive gain/(loss) for the year | - | 44,292 | - | 1,371,271 | 1,415,563
Dividend declared | - | - | - | - | -
Balance as at 31 December 2023 | 9,169,870 | 1,409,807 | 800,000 | 14,539,068 | 25,918,745

Statement of changes in equity (continued)
For the year ended 31 December
33
LifeStar Insurance p.l.c. – Annual Financial Report 2023
The Company (continued)

| Share capital | Other reserves | Capital redemption reserve | Retained earnings | Total
| € | € | € | € | €
Balance as at 1 January 2022 | 9,169,870 | 12,975,765 | 800,000 | 8,680,247 | 31,625,882
Impact of initial application of IFRS 17 | - | (11,534,653) | - | 6,551,993 | (4,982,660)
Restated balance as at 1 January 2022 | 9,169,870 | 1,441,112 | 800,000 | 15,232,240 | 26,643,222
Loss for the year | - | - | - | (2,064,443) | (2,064,443)
Other comprehensive gain for the year | - | (75,597) | - | - | (75,597)
Total comprehensive gain/(loss) for the year | - | (75,597) | - | (2,064,443) | (2,140,040)
Dividend declared | - | - | - | - | -
Balance as at 31 December 2022 | 9,169,870 | 1,365,515 | 800,000 | 13,167,797 | 24,503,182

The accounting policies and explanatory notes form an integral part of these financial statements.
Statement of cash flows
For the year ended 31 December
34
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Consolidated
Holding Company

| Notes | 2023 | 2022 Restated | 2023 | 2022 Restated
|  | € | € | € | €
Cash flows (used in)/ generated from operations | 24 | 6,884,116 | (6,227,168) | 5,910,150 | (7,615,317)
Dividends received |  | 589,706 | 697,214 | 589,706 | 697,214
Interest received |  | 844,406 | 950,480 | 844,406 | 950,480
Interest paid |  | - | - | - | -
Tax refund on tax at source |  | - | - | - | -
Tax refund/ (paid) |  | 325,692 | (257,648) | 387,904 | (122,636)
Net cash flows generated from operating activities |  | 8,643,920 | (4,837,122) | 7,732,166 | (6,090,259)

Statement of cash flows (continued)
For the year ended 31 December
35
LifeStar Insurance p.l.c. – Annual Financial Report 2023
Consolidated
Holding Company

| Notes | 2023 | 2022 (restated) | 2023 | 2022 (restated)
|  | € | € | € | €
Cash flows (used in)/ generated from investing activities |  |  |  |  |
Dividends received from subsidiary |  | - | - | 596,368 | 500,000
Purchase of intangible assets | 11 | (1,158,332) | (645,551) | (1,158,332) | (627,748)
Purchase of property, plant and equipment | 13 | (61,832) | (156,270) | (60,295) | (155,012)
Purchase of investments at fair value through profit or loss | 16 | (18,096,418) | (8,927,610) | (18,096,418) | (9,360,923)
Purchase of available-for-sale investments | 16 | - | (433,313) | - | -
Purchase of investments in equity measured at cost |  | - | (1,194,372) | - | -
Proceeds on disposal of investments at fair value through profit or loss | 16 | 8,197,009 | 9,478,885 | 8,197,009 | 9,478,885
Proceeds on disposal of available-for-sale investments | 16 | - | 482,447 | - | 482,447
Proceeds from disposal of other investments | 16 | - | - | - | -
Net proceeds from other investments - loans and receivables | 16 | - | 10,766 | - | 10,766
Proceeds on disposal of assets held for sale |  | - | 190,002 | - | 190,002
Proceeds on disposal of term deposits | 16 | 1,500,000 | 600,000 | 1,500,000 | 600,000
Net cash flows used in generated from investing activities |  | (9,619,573) | (595,016) | (9,021,668) | 1,118,417

Statement of cash flows (continued)
For the year ended 31 December
36
LifeStar Insurance p.l.c. – Annual Financial Report 2023

|  | Consolidated |  | Holding Company |
| Notes | 2023 | 2022 (restated) | 2023 | 2022 (restated)
|  | € | € | € | €
Cash flows (used in)/ generated from financing activities |  |  |  |  |
Interest paid on bonds |  | (97,250) | (96,962) | (97,250) | (96,962)
Payment of lease liability |  | (5,300) | (6,442) | (5,300) | (6,442)
Proceeds from borrowings |  | 37,996 | 39,692 | 37,996 | 39,692
Payables to immediate parent |  | (785) | (36,755) | - | -
Net cash flows (used in)/ generated from financing activities |  | (65,339) | (100,467) | (64,554) | (63,712)
Net movement in cash and cash equivalents |  | (1,040,992) | (5,532,605) | (1,354,056) | (5,035,554)
Cash and cash equivalents as at the beginning of the year |  | 5,962,294 | 11,494,899 | 4,851,135 | 9,886,689
Cash and cash equivalents as at the end of the year | 25 | 4,921,302 | 5,962,294 | 3,497,079 | 4,851,135

The accounting policies and explanatory notes form an integral part of the financial statements.
Material accounting policies
37
LifeStar Insurance p.l.c. – Annual Financial Report 2023
The material 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, except for those adopted for the first time during 2023.
The consolidated financial statements have been prepared from the financial statements of the companies comprising the group as detailed in notes to the consolidated financial statements.
1.Basis of preparation
LifeStar Insurance p.l.c. was incorporated on 21 December 2001 as an insurance company. The registered address and principal place of business of the company is LifeStar, Testaferrata Street, Ta’ Xbiex.
These financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU (EU IFRS’s), the Insurance Business Act (Cap. 403 of the Laws of Malta) and the Companies Act (Cap. 386). The financial statements are prepared under the historical cost convention, as modified by the fair valuation of investment property and financial assets and financial liabilities at fair value through profit or loss.
The preparation of financial statements in conformity with EU IFRS’s requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies of the company and the subsidiary (the Group). The areas involving a higher degree of judgement or complexity are disclosed in Note 1 to these financial statements.
The Group’s statement of financial position is presented in increasing order of liquidity, with additional disclosures on the current or non-current nature of the Group’s assets and liabilities provided within the notes to the financial statements.
LifeStar Insurance p.l.c.’s intermediate parent company (Note 30) prepares consolidated financial statements in accordance with the Companies Act (Cap. 386 of the Laws of Malta). LifeStar Insurance p.l.c. also prepares consolidated financial statements which include the results of the Group, which comprises the Company and its subsidiary as disclosed in Note 14.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
-Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
-Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
-Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.
Material accounting policies (continued)
38
LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Appropriateness of going concern assumption in the preparation of the financial statements
The volatility in the financial markets had a significant impact on the Group’s financial performance for the financial year ending 31 December 2023, and will continue to impact its performance going forward. Furthermore, an analysis was carried out on the credit rating of the main counterparties and no significant downgrades were noted since 31 December 2023. Such analysis was also extended to analyse the effect on the Solvency Capital Requirements (the “SCR”) of the Group by reference to stressed scenarios in the latest ORSA report prepared by the Group. Taking into consideration the current laws and regulations and the result from the aforementioned stressed scenarios. However, the Company continues to explore any and all ways possible to strengthen its capital base.
Having concluded this assessment the Directors expect that the Group will be able to sustain its operations over the next twelve months and in the foreseeable future and consider the going concern assumption in the preparation of the Group’s financial statements as appropriate as at the date of authorisation for issue of these financial statements.
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year
The following accounting pronouncements became effective from 1 January 2023 and have therefore been adopted:
•IFRS 17, Insurance Contracts adopted together with IFRS 9, Financial Instruments as adopted by the EU;
•Amendments to IAS 1, Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies;
•Amendments to IAS 12, income Taxes; Deferred tax related to Assets and Liabilities arising from a Single Transaction;
•Amendments to IAS 12, income Taxes; International Tax Reform – Pillar Two Model Rules; and
•Amendments to IAS 8, Accounting policies, Changes in accounting Estimates and Errors; Definition of Accounting Estimates
Changes in material accounting policies from the adoption of new standards
IFRS 17, Insurance Contracts
The Company has initially applied IFRS 17 from 1 January 2023. This standard has brought significant changes to the accounting for insurance contracts. As a result, the Company has restated certain comparative amounts and presented a third statement of financial position as at 1 January 2022. The nature and effects of the key changes in the Company’s material accounting policies resulting from its adoption of IFRS 17 are summarised below.
Changes to Classification and Measurement
IFRS 17 establishes principles for the recognition and measurement of insurance contracts issued (including investment contracts with discretionary participation features [“DPF”]) and reinsurance contracts held by the Company.
Material accounting policies (continued)
39
LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Changes to Classification and Measurement (continued)
The key principles of IFRS 17 are that a company:
•Identifies insurance contracts as those under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder;
•Separates specified embedded derivatives, distinct investment components and distinct goods or services other than insurance contract services from insurance contracts and accounts for them in accordance with other standards;
•Divides the insurance and reinsurance contracts into groups it will recognise and measure;
•Recognises and measures groups of insurance contracts at:
For all groups of insurance contracts measured under the general measurement model
(“GMM”) and the variable fee approach (“VFA”):
-A risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment cash flows in a way that is consistent with observable market information plus;
-An amount representing the unearned profit in the group of contracts (the contractual service margin or CSM).
For all groups of insurance contracts measured under the premium allocation approach
(“PAA”):
-The liability for remaining coverage reflects premiums received less deferred insurance acquisition cash flows and less amounts recognised in revenue for insurance services provided;
-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;
-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).
Material accounting policies (continued)
40
LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Changes to Classification and Measurement (continued)
For all groups of insurance contracts:
-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;
-Recognises profit from a group of insurance contracts over each period the Company provides insurance contract services, as the Company is released from risk. If a group of contracts is expected to be onerous (i.e., loss-making) over the remaining coverage period, the Company recognises the loss immediately;
-Recognises an asset for insurance acquisition cash flows in respect of acquisition cash flows paid, or incurred, before the related group of insurance contracts is recognised. Such an asset is derecognised when the insurance acquisition cash flows are included in the measurement of the related group of insurance contracts.
The Company’s classification and measurement of insurance and reinsurance contracts and investment contracts with discretionary participation features is explained in Note 2.
Changes to Presentation and Disclosure
For presentation in the statement of financial position, the Company aggregates portfolios of insurance contracts issued (including investment contracts with discretionary participation features), and reinsurance contracts held and presents separately:
•Portfolios of insurance contracts issued that are assets;
•Portfolios of reinsurance contracts held that are assets;
•Portfolios of insurance contracts issued that are liabilities;
•Portfolios of reinsurance contracts held that are liabilities.
The portfolios referred to above are those established at initial recognition in accordance with the IFRS 17 requirements.
The line-item descriptions in the statement of profit or loss and other comprehensive income have been changed significantly compared with last year. Previously the Company reported the following line items:
•Gross premiums written;
•Outward reinsurance premiums;
•Benefits and claims incurred;
•Change in other technical provisions.
Material accounting policies (continued)
41
LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Changes to Presentation and Disclosure (continued)
Instead, IFRS 17 requires separate presentation of:
•Insurance revenue.
•Insurance service expense.
•Allocation of reinsurance premiums.
•Amounts recoverable from reinsurers for incurred claims.
•Insurance finance income or expenses.
•Reinsurance finance income or expenses.
The Company provides disaggregated qualitative and quantitative information in the notes to the financial statements about:
•Amounts recognised in its financial statements from insurance contracts.
•Significant judgements, and changes in those judgements, when applying the standard.
Transition
Full Retrospective Approach
Contracts measured under the PAA
On transition to IFRS 17, the Company has applied the full retrospective approach for contracts measured under the PAA.
The Company has applied the full retrospective approach on transition for all groups of insurance and reinsurance contracts containing contracts with short-term coverage period not extending beyond one year. For these short-term contracts it was concluded that reasonable and supportable information that is necessary to apply the full retrospective approach is available.
Applying the full retrospective approach, the Company:
•has identified, recognised, and measured each group of insurance contracts as if IFRS 17 had always applied;
•has identified, recognised, and measured any assets for insurance acquisition cash flows as if IFRS 17 had always applied;
•derecognised previously reported balances that would not have existed if IFRS 17 had always been applied. These include deferred acquisition costs for insurance contracts and insurance receivables and payables. Under IFRS 17, they are included in the measurement of the insurance contracts;
•and recognised any resulting net difference in equity.
Material accounting policies (continued)
42
LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Transition (continued)
Fair Value Approach
Contracts not measured under the PAA
Changes in accounting policies resulting from the adoption of IFRS 17 for all groups of insurance and reinsurance contracts containing contracts with long-term coverage period extending beyond one year have been applied using the fair value transition approach as it was impracticable to apply the full retrospective approach.
Under this method these groups of insurance and reinsurance contracts on transition date, 1 January 2022, have been measured at fair value, any existing balances that would not exist had IFRS 17 applied have been derecognised and the resulting net difference recognised in equity.
The Company considered that the full retrospective approach was impracticable for long-term insurance and reinsurance contract groups. Specifically, the effects of retrospective application were not determinable because the information required has not been collected (or has not been collected with sufficient granularity) or was unavailable because of system limitations, data retention requirements or other reasons. Such information includes:
•expectations about a contract's profitability and risks of becoming onerous required for identifying groups of contracts;
•information about historical cash flows (including insurance acquisition cash flows and other cash flows incurred before the recognition of the related contracts) and discount rates required for determining the estimates of cash flows on initial recognition and subsequent changes on a retrospective basis;
•information required to allocate fixed and variable overheads to groups of contracts, because the Company's current accounting policies do not require such information; and
•information about certain changes in assumptions and estimates because they were not documented on an ongoing basis.
Under the fair value approach, the CSM (or the loss component) at 1 January 2022 was determined as the difference between the fair value of a group of contracts at that date and the fulfilment cash flows at that date. In determining fair value, the Company applied the requirements of IFRS 13 Fair Value Measurement, except for the demand deposit floor requirement, as is prescribed by IFRS 17.
Specifically, the fair value of the insurance contracts was measured as the sum of (a) the present value of the net cash flows expected to be generated by the contracts, determined using a discounted cash flow technique; and (b) an additional margin, determined using a cost of capital technique.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 17, Insurance Contracts (continued)
Transition (continued)
Fair Value Approach (continued)
Contracts not measured under the PAA (continued)
Differences in the Company's approach to measuring fair value from the IFRS 17 requirements for measuring fulfilment cash flows gave rise to a CSM at 1 January 2022. In particular, in measuring fair value the Company included a margin comprising a risk premium to reflect what market participants would demand as compensation for the uncertainty inherent in the cash flows and a profit margin to reflect what market participants would require in order to assume the obligations to service the insurance contracts. In determining this margin, the Company considered certain costs that are not directly attributable to fulfilling the contracts (e.g., general overheads) and certain risks that were not reflected in the fulfilment cash flows, among other factors that a market participant would consider.
When applying the fair value transition approach the Company aggregated contracts issued more than one year apart as it did not have reasonable and supportable information to aggregate groups into those including only contracts issued within one year.
For the application of the fair value approach, the Company used reasonable and supportable information available at the transition date in order to:
•Identify groups of insurance contracts;
•Determine whether any contracts are direct participating insurance contracts.
The discount rate when applying the fair value approach was determined at the transition date. The Company has applied the transition provisions of IFRS 17 and has not disclosed the impact of adoption of IFRS 17 on each financial statement line item. The effects of adopting IFRS 17 on the financial statements at 1 January 2022 are presented in the statement of changes in equity.
IFRS 9, Financial instruments
In the current year, the Group has applied IFRS 9 Financial instruments (as revised in 2014) and the related consequential amendments to other IFRSs, including IFRS 7 Financial Instruments: Disclosures. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement.
Based on the transitional provisions of the Standard, the Group has applied IFRS 9 retrospectively. The Group has elected not to restate its comparative information for the effects of IFRS 9 and such information continues to be reported under IAS 39. In terms of this approach, any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application is recognised in equity at the date of initial application.
The date of initial application is 1 January 2023. Additionally, the additional disclosures in IFRS 7 have not generally been applied to comparative information. Both the accounting policies under IAS 39 and the accounting policies under IFRS 9 are disclosed in the material accounting policies.
In accordance with the transitional provisions of the Standard, the Company has not applied the requirements of IFRS 9 to instruments that have already been derecognised as at 1 January 2023.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
The Company’s accounting policies for its financial instruments are disclosed in detail in the material accounting policies section.
The relevant changes in the estimation techniques or significant assumptions made during the reporting period as a result of the adoption of IFRS 9 are described in the material accounting policies and in the remaining notes to the financial statements.
IFRS 9 introduces new requirements for a) the classification and measurement of financial assets and financial liabilities, b) impairment for financial assets and c) general hedge accounting.
a.Classification and measurement of financial liabilities
The table below illustrates the classification and measurement of financial liabilities under IFRS 9 and IAS 39 at the date of initial application, 1 January 2023.

| Original measurement category under IAS 39 | New measurement category under IFRS 9 | Group Original carrying amount under IAS 39 as of 31 December 2022 / New carrying amount under IFRS 9 as of 1 January 2023 | Company Original carrying amount under IAS 39 as of 31 December 2022 / New carrying amount under IFRS 9 as of 1 January 2023
Trade and other payables | Financial liabilities at amortised cost | Financial liabilities measured at amortised cost | 917,835 | 552,921
Intercompany Loans | Financial liabilities at amortised cost | Financial liabilities measured at amortised cost | 33,919 | -
|  | Total | 951,754 | 552,921

b.Classification and measurement of financial assets and impairment losses
The application of IFRS 9 has had no impact on the cash flows of the Company.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
b.Classification and measurement of financial assets and impairment losses (continued)
The table below illustrates the classification and measurement of financial assets under IFRS 9 and IAS 39 at the date of initial application, 1 January 2023.
Group

| Original measurement category under IAS 39 | New measurement category under IFRS 9 | Original carrying amount under IAS 39 as of 31 December 2022 | New carrying amount under IFRS 9 as of 1 January 2023
Available for sale (Foreign and Local Equity) | Available-for-sale investments | Financial assets measured at FVTPL | 2,759,131 | 2,759,131
Investments in equity measured at cost | Cost less impairment losses | Financial assets measured at FVTPL | 2,076,598 | 2,076,598
Financial assets at FVTPL - designated debt | Financial assets measured at FVTPL | Financial assets measured at FVTPL | 21,662,795 | 21,662,795
Financial assets at FVTPL - designated equity | Financial assets measured at FVTPL | Financial assets measured at FVTPL | 24,275,660 | 24,275,660
Financial assets at FVTPL - designated asset | Financial assets measured at FVTPL | Financial assets measured at FVTPL | 32,042,443 | 32,042,443
Trade and other receivables (excluding prepayments) | Loans and receivables | Financial assets measured at amortised cost | 20,899,199 | 20,899,199
Cash and cash equivalents | Loans and receivables | Financial assets measured at amortised cost | 5,962,294 | 5,962,294
|  | Total | 109,678,120 | 109,678,120

Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
b.Classification and measurement of financial assets and impairment losses (continued)
Company

| Original measurement category under IAS 39 | New measurement category under IFRS 9 | Original carrying amount under IAS 39 as of 31 December 2022 | New carrying amount under IFRS 9 as of 1 January 2023
Available for sale (Foreign and Local Equity) | Available-for-sale investments | Financial assets measured at FVTPL | 2,759,131 | 2,759,131
Investments in equity measured at cost | Cost less impairment losses | Financial assets measured at FVTPL | 2,076,598 | 2,076,598
Financial assets at FVTPL - designated debt | Financial assets measured at FVTPL | Financial assets measured at FVTPL | 21,662,795 | 21,662,795
Financial assets at FVTPL - designated equity | Financial assets measured at FVTPL | Financial assets measured at FVTPL | 24,275,660 | 24,275,660
Financial assets at FVTPL - designated asset | Financial assets measured at FVTPL | Financial assets measured at FVTPL | 32,042,443 | 32,042,443
Trade and other receivables (excluding prepayments) | Loans and receivables | Financial assets measured at amortised cost | 19,223,059 | 19,223,059
Cash and cash equivalents | Loans and receivables | Financial assets measured at amortised cost | 4,851,135 | 4,851,135
|  | Total | 106,890,821 | 106,890,821

The cumulative effect of initially applying the Standard on 1 January 2023 to the financial assets did not result in any impact on the Company’s Retained earnings.
In terms of IFRS 9, for financial assets measured at amortised cost, the Company applies an Expected Credit Loss (ECL) model as opposed to an incurred credit loss model under IAS 39. There was no change to the loss allowance at 1 January 2023 as a result of the new impairment model in terms of IFRS 9.
Financial assets that were previously classified as loans and receivables are classified in terms of IFRS 9 as financial assets measured at amortised cost if they meet the conditions for such classification. There was no change in the carrying amount of these instruments at 1 January 2023 as a result of the new classification in terms of IFRS 9.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
1.Basis of preparation (continued)
Standards, interpretations and amendments to published standards as endorsed by the EU that are effective in the current year (continued)
Changes in material accounting policies from the adoption of new standards (continued)
IFRS 9, Financial instruments (continued)
b.Classification and measurement of financial assets and impairment losses (continued)
In accordance with the transitional provisions of IFRS 9, the Company assessed the business model in which the financial assets are held on the basis of the facts and circumstances at 1 January 2023 and the resulting classification is being applied retrospectively irrespective of the Company’s business model in prior reporting periods. There was no change in the carrying amount of these instruments at 1 January 2023 as a result of the new classification in terms of IFRS 9.
Debt and equity financial assets that were previously measured at FVTPL continue to be measured at FVTPL in terms of IFRS 9. As a result, there was no change in the carrying amount of these instruments at 1 January 2023 as a result of the new classification in terms of IFRS 9.
Financial assets that were previously classified as available for sale under IAS 39, are classified in terms of IFRS 9 as financial assets measured at FVTPL. The provision for changes in fair value of these assets were included within OCI, contrary to FVTPL as per in IFRS 9 requirements. The reclassification of this reserve from OCI to FVTPL amounted to €512,473 which is included in the Statement of Changes in Equity.
Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group
At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts
2.1 Insurance contracts – Product lines
The following table summarises the characteristics of the Company’s insurance contracts that are measured under IFRS 17 and the measurement methods.

IFRS 17 Product line | Contracts issued | Measurement Method | Insurance finance income and expense
Participating | Direct participating insurance contracts and investment contracts with discretionary participation features where the Company shares the performance of underlying items with policyholders. Guaranteed returns may also be offered. | Variable Fee Approach | Profit or loss
Savings | Investment-linked insurance policies which have a life insurance coverage and an investment account balance. These contracts also include individual and group pension plans which are based on life insurance unit-linked policies. | Variable Fee Approach | Profit or loss
Other life | Group life and non-participating individual life insurance contracts. Individual insurance contracts include Term, Endowment and Whole of Life insurance contracts. | Premium Allocation Approach General Measurement Model | Profit or loss
Sickness & Accident | Individual insurance contracts providing coverage for health and personal accidents. | General Measurement Model | Profit or loss

In addition to issuing insurance contracts, the Company holds reinsurance contracts to mitigate certain risk exposures.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.1 Aggregation basis (continued)
The following table summarises the characteristics of the Company’s reinsurance contracts held and the measurement methods.

IFRS 17 Product line | Reinsurance contracts held (underlying risk covered) | Measurement Method | Insurance finance income and expense
Life | Life risk reinsurance contracts with underlying Unit Linked, Term, Endowment and Whole life insurance contracts. | General Measurement Model | Profit or loss
| Reinsurance treaties with underlying group life insurance contracts. | Premium Allocation Approach | Profit or loss
| Catastrophe cover reinsurance contract covering the aggregate risk of the underlying contracts arising from catastrophic events. | Premium Allocation Approach | Profit or loss

2.2 Definition and classification of insurance and reinsurance contracts
Insurance contracts are contracts under which the Company accepts significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder.
In making this assessment, all substantive rights and obligations, including those arising from law or regulation, are considered on a contract-by-contract basis at the contract issue date. The Company uses judgement to assess whether a contract transfers insurance risk (that is, if there is a scenario with commercial substance in which the Company has the possibility of a loss on a present value basis) and whether the accepted insurance risk is significant.
The Company determines whether it has significant insurance risk, by comparing benefits payable after an insured event with benefits payable if the insured event had not occurred.
The Company issues contracts under which it accepts significant insurance risk from its policyholders, which are classified as insurance contracts.
Some investment contracts contain discretionary participation features (“DPF”), whereby the investor has the right and is expected to receive, as a supplement to the amount not subject to the Company’s discretion, potentially significant additional benefits based on the return of specified pools of investment assets.
The Company issues investment contracts with DPF which are linked to the same pool of assets as insurance contracts and have economic characteristics similar to those of insurance contracts. The Company shall account for these contracts applying IFRS 17.
Contracts are classified as direct participating contracts or contracts without direct participation features.
A Contract with direct participation features is defined as one which, at inception, meets the following criteria:
•the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
•the Company expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying items; and
•the Company 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.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.2 Definition and classification of insurance and reinsurance contracts (continued)
These criteria are assessed at the individual contract level based on the Company’s expectations at the contract’s inception, and they are not reassessed in subsequent periods, unless the contract is modified. The variability in the cash flows is assessed over the expected duration of a contract. The duration of a contract takes into account all cash flows within the boundary.
The savings and pensions (unit linked) contracts as well as the profit sharing contracts held within the run-off portfolio of the Company will be classified as direct participating contracts.
Such contracts allow policyholders to participate in investment returns with the Company, in addition to compensation for losses from insured risk. These contracts are substantially investment service-related contracts where the return on the underlying items is shared with policyholders. Underlying items comprise specified portfolios of investment assets that determine amounts payable to policyholders.
In addition to issuing insurance contracts, the Company holds reinsurance contracts to mitigate certain risk exposures. A reinsurance contract is an insurance contract issued by a reinsurer to compensate the Company for claims arising from one or more insurance contracts issued by the Company. These are quota share and excess of loss reinsurance contracts. For reinsurance contracts held by the Company, even if they do not expose the issuer (the reinsurer) to the possibility of a significant loss they would still be deemed to transfer significant insurance risk if they transfer substantially all of the insurance risk relating to the reinsured portions of the underlying insurance contracts to the reinsurer.
2.3 Separating components from insurance contracts
At inception, the Company separates the following components from an insurance contract and accounts for them as if they were stand-alone financial instruments:
•derivatives embedded in the contract whose economic characteristics and risks are not closely related to those of the host contract, and whose terms would not meet the definition of an insurance contract as a stand-alone instrument; and
•distinct investment components i.e. investment components that are not highly inter-related with the insurance components and for which contracts with equivalent terms are sold, or could be sold, separately in the same market or the same jurisdiction.
The Company issues certain contracts which include a promise to transfer a good or non-insurance service. These transfers of a good or non-insurance service are not distinct and therefore are not separated from the contracts.
An investment component comprises of the amounts that an insurance contract requires the Company to repay to a policyholder in all circumstances, regardless of whether an insured event occurs. Investment components which are highly interrelated with the insurance contract of which they form a part are considered non-distinct and are not separately accounted for.
The Company assesses its insurance contracts to determine whether they contain any derivatives or investment components or promises to transfer to policyholders distinct goods or services other than insurance coverage and investment services which must be accounted for under a different IFRS than IFRS 17. The Company applies, IFRS 17 to all remaining components of the host insurance contract.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.3 Separating components from insurance contracts (continued)
After separating any embedded derivatives or distinct investment components, the Company separates any promises to transfer to policyholders distinct goods or services other than insurance coverage and investment services and accounts for them as separate contracts with customers (i.e. not as insurance contracts). A good or service is distinct if the policyholder can benefit from it either on its own or with other resources that are readily available to the policyholder. A good or service is not distinct and is accounted for together with the insurance component if the cash flows and risks associated with the good or service are highly inter-related with the cash flows and risks associated with the insurance component, and the Company provides a significant service of integrating the good or service with the insurance component.
The Company issues some contracts which include an embedded derivative (surrender option) and/or investment component (account balance) under which the surrender value is paid to the policyholder on maturity or earlier lapse of the contract. These components have been assessed to meet the definition of a highly related and/or non-distinct component. The surrender option is interrelated with the value of the insurance contract and as such, is not separated. Concerning the account balance, the Company is unable to measure the investment component separately from the contract and the policyholder is unable to benefit from the investment component unless the insurance component is also present and as such they are not separated.
Once the embedded derivatives and investment components and the goods and services components are separated, the Company assesses whether the contract should be separated into several insurance components that, in substance, should be treated as separate contracts.
To determine whether a single legal contract does not reflect the substance of the transaction and its insurance components recognised and measured separately instead, the Company considers whether there is an interdependency between the different risks covered, whether components can lapse independently of each other and whether the components can be priced and sold separately.
When the Company enters into one legal contract with different insurance components operating independently of each other, insurance components are recognised and measured separately applying IFRS 17.
Concerning the contracts with supplementary benefits (riders) the Company has determined that the legal contract reflects the substance of the transaction and as such the insurance components are not separated.
The reinsurance contracts held by the Company, despite the fact that they may cover more than one types of risk exposures, reflect single contracts in substance and are treated as one single accounting contract for IFRS 17.
2.4 Aggregation level
The Company identifies portfolios by aggregating insurance contracts that are subject to similar risks and managed together. The Company expects that all contracts within each product line, as defined for management purposes, have similar risks and, therefore, would represent a portfolio of contracts when they are managed together. Reinsurance contracts held have been grouped into portfolios taking into consideration the nature of the risk and the type of reinsurance cover.
Each portfolio is sub-divided into groups of contracts to which the recognition and measurement requirements of IFRS 17 are applied. At initial recognition, the Company segregates contracts based on when they were issued. A portfolio contains all contracts that were issued within a 12-month period.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.4 Aggregation level (continued)
Each annual cohort is then further disaggregated into three groups of contracts:
•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 portfolio.
Portfolios of reinsurance contracts held are assessed for aggregation separately from portfolios of insurance contracts issued. Applying the grouping requirements to reinsurance contracts held, the Company aggregates reinsurance contracts held into groups of:
•contracts for which there is a net gain at initial recognition, if any;
•contracts for which, at initial recognition, there is no significant possibility of a net gain arising subsequently; and
•remaining contracts in the portfolio, if any.
The Company makes an evaluation of whether a set of contracts can be treated together in making the profitability assessment based on reasonable and supportable information. In the absence of such information the Company assesses each contract individually.
If insurance contracts within a portfolio would fall into different groups only because law or regulation specifically constrains the Company’s practical ability to set a different price or level of benefits for policyholders with different characteristics, the Company may include those contracts in the same group.
The determination of whether a contract or a group of insurance contracts issued is onerous is based on the expectations as at the date of initial recognition, with fulfilment cash flow expectations determined on a probability-weighted basis. The Company determines the appropriate level at which reasonable and supportable information is available to assess whether the contracts are onerous at initial recognition and whether the contracts not onerous at initial recognition have a significant possibility of becoming onerous subsequently.
A similar assessment is done for reinsurance contracts held to determine the contracts for which there is a net gain at initial recognition or whether contracts for which there is not a net gain at initial recognition have a significant possibility of a net gain subsequently.
For contracts applying the Premium Allocation Approach (“PAA”) the Company assumes that contracts are not onerous (for reinsurance contracts there is not a net gain) on initial recognition unless there are facts and circumstances indicating otherwise. The Company assesses the likelihood of changes in applicable facts and circumstances to determine whether contracts not onerous (for reinsurance contracts there is not a net gain) at initial recognition belong to a group with no significant possibility of becoming onerous (for reinsurance contracts no significant possibility of a net gain) in the future.
The composition of groups established at initial recognition is not subsequently reassessed.
2.5 Initial recognition
The Company recognises groups of insurance contracts that it issues from the earliest of the following:
•The beginning of the coverage period of the group of contracts;
•The date when the first payment from a policyholder in the group is due, or when the first payment is received if there is no due date;
•When the Company determines that a group of contracts becomes onerous.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.5 Initial recognition (continued)
Concerning onerous contracts such contracts expected on initial recognition to be loss-making are grouped together and such groups are measured and presented separately. Once contracts are allocated to a group, they are not re-allocated to another group, unless they are substantively modified.
The Company recognises a group of reinsurance contracts held:
•If the reinsurance contracts provide proportionate coverage, at the later of the beginning of the coverage period of the group, or the initial recognition of any underlying contract;
•In all other cases, from the beginning of the coverage period of the first contract in the group.
If the Company entered into the reinsurance contract held at or before the date when an onerous group of underlying contracts is recognised prior to the beginning of the coverage period of the group of reinsurance contracts held, the reinsurance contract held is recognised at the same time as the group of underlying insurance contracts is recognised.
The Company adds new contracts to the group when they meet the recognition criteria.
2.6 Contract boundaries
Insurance contracts
The Company includes in the measurement of a group of insurance contracts all the future cash flows within the boundary of each contract in the group.
Cash flows are within the boundary of an insurance contract if they arise from substantive rights and obligations that exist during the reporting period in which the Company can compel the policyholder to pay the premiums, or in which the Company has a substantive obligation to provide the policyholder with services.
Cash flows within the boundary of an insurance contract are those that relate directly to the fulfilment of the contract, including cash flows for which the Company has discretion over the amount or timing.
A substantive obligation to provide services ends when:
•The Company has the practical ability to reassess the risks of the particular policyholder and, as a result, can set a price or level of benefits that fully reflects those risks; or
•Both of the following criteria are satisfied:
-The Company has the practical ability to reassess the risks of the portfolio of insurance contracts that contain the contract and, as a result, can set a price or level of benefits that fully reflects the risk of that portfolio;
-The pricing of the premiums for coverage up to the date when the risks are reassessed does not take into account the risks that relate to periods after the reassessment date.
In determining whether all the risks have been reflected either in the premium or in the level of benefits, the Company considers all risks that policyholders would transfer had it issued the contracts (or portfolio of contracts) at the reassessment date. Similarly, the Company concludes on its practical ability to set a price that fully reflects the risks in the contract or portfolio at a renewal date by considering all the risks that it would assess when underwriting equivalent contracts on the renewal date for the remaining service.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.6 Contract boundaries (continued)
Insurance contracts (continued)
The assessment on the Company’s practical ability to reprice existing contracts takes into account all contractual, legal and regulatory restrictions. In doing so, the Company disregards restrictions that have no commercial substance. The Company also considers the impact of market competitiveness and commercial considerations on its practical ability to price new contracts and repricing existing contracts. Judgement is required to decide whether such commercial considerations are relevant in concluding as to whether the practical ability exists at the reporting date.
The Company issues contracts that include an option to add insurance coverage at a future date so that the Company is obligated to provide additional coverage if the policyholder exercises the option. The Company has no right to compel the policyholder to pay premiums and the option to add insurance coverage at a future date is an insurance component that is not measured separately from the insurance contract.
When the insurance option is not in substance a separate contract and the terms are guaranteed by the Company, the cash flows arising from the option are within the boundary of the contract. If the option is not a separate contract and the terms are not guaranteed by the Company, the cash flows arising from the option might be either within or outside the contract boundary, depending on whether the Company has the practical ability to set a price that fully reflects the reassessed risks of the whole contract. In case where the Company does not have the practical ability to reprice the whole contract when the policyholder exercises the option to add coverage, the expected cash flows arising from the additional premiums after the option exercise date would be within the original contract boundary.
In estimating expected future cash flows of the group of contracts the Company applies its judgement in assessing future policyholder behaviour surrounding the exercise of options available to them such as surrenders options, and other options falling within the contract boundary.
The Company assesses the contract boundary at initial recognition and at each subsequent reporting date to include the effect of changes in circumstances on the Company’s substantive rights and obligations.
Reinsurance contracts
For groups of reinsurance contracts held, cash flows are within the contract boundary if they arise from substantive rights and obligations of the cedant that exist during the reporting period in which the Company is compelled to pay amounts to the reinsurer or has a substantive right to receive insurance contract 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 transfer 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.
The boundary of a reinsurance contract held includes cash flows resulting from the underlying contracts covered by the reinsurance contract. This includes cash flows from insurance contracts that are expected to be issued by the Company in the future if these contracts are expected to be issued within the boundary of the reinsurance contract held.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.6 Contract boundaries (continued)
Reinsurance contracts (continued)
The Company holds proportional life reinsurance contracts which have an unlimited duration but which allow both the reinsurer and the Company to terminate the contract at three months’ notice for new business ceded. The Company includes within the contracts boundary only cash flows arising from such three months’ notice period because it does not have substantive rights or obligations beyond that point. Therefore, on initial recognition, the cash flows within the reinsurance contract boundary are determined to be those arising from underlying contracts that the Company expects to issue and cede under the reinsurance contract within the next three months. Subsequently, expected cash flows beyond the end of this initial notice period are considered cash flows of new reinsurance contracts and are recognised, separately from the initial contract, as they fall within the rolling three-month notice period. Other life reinsurance agreements have a cancellability clause for new business with three months’ notice but this being effective at the next annual renewal of the agreement and hence, in this case, on initial recognition the cash flows within the reinsurance contract boundary are determined to be those arising from underlying contracts that the Company expects to issue and cede under the reinsurance contract within the year. The Company treats all the above mentioned reinsurance contracts as a series of contracts that form an annual group and cover underlying business issued within a year.
The Company holds proportional group life reinsurance contracts that have a short-term boundary and cover short-term underlying contracts issued within the term on a risk-attaching basis. All cash flows arising from claims incurred and expected to be incurred during the life of the underlying contracts are included in the measurement.
Finally, the Company’s non-proportional, excess of loss reinsurance contracts held, have an annual term and provide coverage for claims incurred during an accident year (i.e. loss occurring). Thus, all cash flows arising from claims incurred and expected to be incurred in the accident year are included in the measurement of the reinsurance contracts held.
2.7 Insurance acquisition cashflows
Insurance acquisition cash flows arise from the costs of selling, underwriting and starting a group of insurance contracts (issued or expected to be issued) that are directly attributable to the portfolio of insurance contracts to which the group belongs. Such cash flows include cash flows that are not directly attributable to individual contracts or groups of insurance contracts within the portfolio. Costs which are not directly attributable are recognised in the profit and loss account immediately.
Insurance acquisition cash flows that are directly attributable to a group of insurance contracts are allocated to that group and to renewal groups of insurance contracts using a systematic and rational method and considering, in an unbiased way, all reasonable and supportable information that is available without undue cost or effort.
A systematic and rational method is also used to allocate insurance acquisition cash flows directly attributable to a portfolio but not to groups of contracts to such groups in the portfolio.
Insurance acquisition cash flows arising before the recognition of the related group of contracts are recognised as an asset. Insurance acquisition cash flows arise when they are paid or when a liability is required to be recognised under a standard other than IFRS 17. Such an asset is recognised for each group of contracts to which the insurance acquisition cash flows are allocated. The asset is derecognised, fully or partially, when the insurance acquisition cash flows are included in the measurement of the group of contracts.
Material accounting policies (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Insurance contracts (continued)
2.7 Insurance acquisition cashflows (continued)
At each reporting date, the Company revises the amounts allocated to groups to reflect any changes in assumptions that determine the inputs to the allocation method used. Amounts allocated to a group are not revised once all contracts have been added to the group.
The Company reverses any impairment losses in profit or loss and increases the carrying amount of the asset to the extent that the impairment conditions have improved.
2.8 Measurement of insurance contracts issued
The liability for remaining coverage (“LRC”) represents the Company’s obligation to investigate and pay valid claims under existing contracts for insured events that have not yet occurred (i.e. the obligation that relates to the unexpired portion of the coverage period), comprising (a) fulfilment cash flows relating to future service and (b) the contractual service margin yet to be earned.
The liability for incurred claims (“LIC”) includes the Company’s liability to pay valid claims for insured events that have already incurred, other incurred insurance expenses arising from past coverage service and it includes the Company’s liability to pay amounts the Company is obliged to pay the policyholder under the contract, including repayment of investment components, when a contract is derecognised. The current estimate of LIC comprises the fulfilment cash flows related to current and past service allocated to the group at the reporting date.
The carrying amount of a group of insurance contracts at each reporting date is the sum of the LRC and the LIC.
2.8.1 Measurement on initial recognition of contracts not measured under the PAA
Under the GM the Company measures a group of contracts on initial recognition as the sum of the expected fulfilment cash flows within the contract boundary and the contractual service margin representing the unearned profit in the contracts relating to services that will be provided under the contracts.
Fulfilment Cashflows (“FCF”)
FCF comprise unbiased and probability-weighted estimates of future cash flows, an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows, plus a risk adjustment for non-financial risk.
The Company’s objective in estimating future cash flows is to determine the expected value, or the probability weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information available at the reporting date without undue cost or effort, that reflect the timing and uncertainty of those future cash flows.
The Company estimates future cash flows considering a range of scenarios which have commercial substance and give a good representation of possible outcomes. The cash flows from each scenario are probability-weighted and discounted using current assumptions.
The Company estimates certain FCF at the portfolio level or higher and then allocates such estimates to groups of contracts.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8 Measurement of insurance contracts issued (continued)
2.8.1 Measurement on initial recognition of contracts not measured under the PAA
(continued)
Fulfilment Cashflows (“FCF”) (continued)
When estimating future cash flows, the Company includes all cash flows that are within the contract boundary including:
•Premiums and related cash flows;
•Claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims;
•Payments to policyholders resulting from embedded surrender value options;
•An allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs;
•Claims handling costs;
•Policy administration and maintenance costs;
•An allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts;
•Transaction-based taxes;
•Costs incurred for performing investment activities that enhance insurance coverage benefits for the policyholder;
•Costs incurred for providing investment-related service to policyholders.
The cash flow estimates include both market variables, which are consistent with observable market prices, and non-market variables, which are not contradictory with market information and based on internally and externally derived data.
The Company updates its estimates at the end of each reporting period using all newly available, as well as historic evidence and information about trends. The Company determines its current expectations of probabilities of future events occurring at the end of the reporting period. In developing new estimates, the Company considers the most recent experience and earlier experience, as well as other information.
Risk of the Company’s non-performance is not included in the measurement of groups of insurance contracts issued.
Risk Adjustment (“RA”)
The risk adjustment for non-financial risk for a group of insurance contracts, determined separately from the other estimates, is the compensation required for bearing uncertainty about the amount and timing of the cash flows that arises from non-financial risk to fulfill insurance contracts.
The risk adjustment also reflects the degree of diversification benefit the Company includes when determining the compensation it requires for bearing that risk; and both favourable and unfavourable outcomes, in a way that reflects the Company’s degree of risk aversion.
The Company uses a Risk-based capital approach based on which the risk adjustment can be determined at the chosen level of confidence.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8 Measurement of insurance contracts issued (continued)
2.8.1 Measurement on initial recognition of contracts not measured under the PAA
(continued)
Time value of money and financial risks
The Company adjusts the estimates of future cash flows to reflect the time value of money and the financial risks related to those cash flows, to the extent that the financial risks are not included in the estimates of cash flows. The discount rates applied to the estimates of the future cash flows:
•reflect the time value of money, the characteristics of the cash flows and the liquidity characteristics of the insurance contracts;
•are consistent with observable current market prices (if any) for financial instruments with cash flows whose characteristics are consistent with those of the insurance contracts, in terms of, for example, timing, currency and liquidity; and
•exclude the effect of factors that influence such observable market prices but do not affect the future cash flows of the insurance contracts.
In determining discount rates for cash flows that do not vary based on the returns of underlying items, the Company uses the ‘bottom-up approach’ to estimate discount rates.
Contractual Service Margin (“CSM”)
The CSM is a component of the overall carrying amount of a group of insurance contracts representing unearned profit the Company will recognise as it provides insurance contract services over the coverage period.
On initial recognition of a group of insurance contracts, if the total of (a) the fulfilment cash flows, (b) any cash flows arising at that date and (c) any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group (including assets for insurance acquisition cash flows) is a net inflow, the CSM is measured as the equal and opposite amount of the net inflow, which results in no gain no loss, arising on initial recognition.
If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognised as a loss in profit or loss. A loss component is created to depict the amount of the net cash outflow, which determines the amounts that are subsequently presented in profit or loss as reversals of losses on onerous contracts and are excluded from insurance revenue.
The Company determines, at initial recognition, the group’s coverage units and allocates the group’s CSM based on the coverage units provided in the period.
2.8.2 Subsequent measurement of contracts not measured under the PAA
Changes in fulfilment cash flows
At the end of each reporting period, the Company will update the fulfilment cash flows for both LIC and LRC to reflect the current estimates of the amounts, timing and uncertainty of future cash flows, as well as discount rates and other financial variables.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8 Measurement of insurance contracts issued (continued)
2.8.2 Subsequent measurement of contracts not measured under the PAA (continued)
Changes in fulfilment cash flows (continued)
Experience adjustments would be the difference between:
•The expected cash flow estimate at the beginning of the period and the actual cash flows for premiums received in the period (and any related cash flows paid such as insurance acquisition cash flows);
•The expected cash flow estimate at the beginning of the period and the actual incurred amounts of insurance service expenses in the period (excluding insurance acquisition expenses).
Experience adjustments relating to current or past service will be recognized in profit or loss. For incurred claims (including incurred but not reported) and other incurred insurance service expenses, experience adjustments would always relate to current or past service. They would be included in profit or loss as part of insurance service expenses. Experience adjustments relating to future service will be included in the LRC by adjusting the CSM.
Adjustments to the CSM - Insurance contracts without direct participation features
For a group of insurance contracts, the carrying amount of the CSM of the group at the end of the reporting period equals the carrying amount at the beginning of the reporting period adjusted, as follows:
•The effect of any new contracts added to the group in the reporting period;
•Interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at initial recognition;
•The changes in fulfilment cash flows relating to future service, except to the extent that:
-Such increases in the fulfilment cash flows exceed the carrying amount of the CSM, giving rise to a loss; or
-Such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage;
•The effect of any currency exchange differences on the CSM;
•The amount recognised as insurance revenue because of the transfer of services in the period, determined by the allocation of the CSM remaining at the end of the reporting period (before any allocation) over the current and remaining coverage period.
The locked-in discount rate is the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over a 12-month period.
The changes in fulfilment cash flows relating to future service that adjust the CSM comprise of:
•Experience adjustments that arise from the difference between the premium receipts (and any related cash flows such as insurance acquisition cash flows) and the estimate, at the beginning of the period, of the amounts expected.
•Changes in estimates of the present value of future cash flows in the liability for remaining coverage, except those relating to the time value of money and changes in financial risk (recognised in the statement of profit or loss and other comprehensive income rather than adjusting the CSM)
•Differences between:
-any investment component expected to become payable in the year, determined as the payment expected at the start of the year plus any insurance finance income or expenses related to that expected payment before it becomes payable; and
-the actual amount that becomes payable in the year
•Changes in the risk adjustment for non-financial risk that relate to future service
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8 Measurement of insurance contracts issued (continued)
2.8.2 Subsequent measurement of contracts not measured under the PAA (continued)
Adjustments to the CSM - Insurance contracts without direct participation features (continued)
Except for changes in the risk adjustment, adjustments to the CSM noted above are measured at discount rates that reflect the characteristics of the cash flows of the group of insurance contracts at initial recognition.
The CSM at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss, because it relates to future service.
An amount of the CSM is released to profit or loss in each period during which the insurance contract services are provided.
In determining the amount of the CSM to be released in each period, the Company follows three steps:
•determines the total number of coverage units in the group. The amount of coverage units in the group is determined by considering for each contract the quantity of benefits provided under the contract and the expected coverage period;
•allocates the CSM at the end of the period (before any of it is released to profit or loss to reflect the insurance contract services provided in the period) equally to each of the coverage units provided in the current period and expected to be provided in the future;
•recognises in profit or loss the amount of CSM allocated to the coverage units provided during the period.
The number of coverage units changes as insurance contract services are provided, contracts expire, lapse or surrender and new contracts are added into the group. The total number of coverage units depends on the expected duration of the obligations that the Company has from its contracts, which can differ from the legal contract maturity because of the impact of policyholder behaviour and the uncertainty surrounding future insured events. In determining a number of coverage units, the Company exercises judgement in estimating the likelihood of insured events occurring and policyholder behaviours to the extent that they affect expected period of coverage in the group, the different levels of service offered across periods and the ‘quantity of benefits’ provided under a contract.
The Company does not issue insurance contracts generating cash flows in a foreign currency that is different from the functional currency of the Company.
Adjustments to the CSM - Insurance contracts with direct participation features
Direct participating contracts are contracts under which the Company’s obligation to the policyholder is the net of:
•the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and
•a variable fee in exchange for future services provided by the contracts, being the amount of the Company’s share of the fair value of the underlying items less fulfilment cash flows that do not vary based on the returns on underlying items.
When measuring a group of direct participating contracts, the Company adjusts the fulfilment cash flows for the whole of the changes in the obligation to pay policyholders an amount equal to the fair value of the underlying items. These changes do not relate to future services and are recognised in profit or loss. The Company then adjusts any CSM for changes in the amount of the Company’s share of the fair value of the underlying items which relate to future services.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8 Measurement of insurance contracts issued (continued)
2.8.2 Subsequent measurement of contracts not measured under the PAA (continued)
Adjustments to the CSM - Insurance contracts with direct participation features (continued)
Hence, the carrying amount of the CSM at each reporting date is the carrying amount at the start of the year, adjusted for:
•the CSM of any new contracts that are added to the group in the year;
•the change in the amount of the Company’s share of the fair value of the underlying items and changes in fulfilment cash flows that relate to future services, except to the extent that:
-a decrease in the amount of the Company’s share of the fair value of the underlying items, or an increase in the fulfilment cash flows that relate to future services, exceeds the carrying amount of the CSM, giving rise to a loss in profit or loss (included in insurance service expenses) and creating a loss component; or
-an increase in the amount of the Company’s share of the fair value of the underlying items, or a decrease in the fulfilment cash flows that relate to future services, is allocated to the loss component, reversing losses previously recognised in profit or loss (included in insurance service expenses);
•the effect of any currency exchange differences on the CSM; and
•the amount recognised as insurance revenue because of the services provided in the year.
Changes in fulfilment cash flows that relate to future services include the changes relating to future services specified above for contracts without direct participation features (measured at current discount rates) and changes in the effect of the time value of money and financial risks that do not arise from underlying items – e.g. the effect of financial guarantees.
Onerous Contracts
After the loss component is recognised, the Company allocates any subsequent changes in fulfilment cash flows of the LRC on a systematic basis between ‘loss component’ and ‘LRC excluding the loss component’.
The subsequent changes in the fulfilment cash flows of the LRC to be allocated are:
•insurance finance income or expense;
•changes in risk adjustment for non-financial risk recognised in profit or loss representing release from risk in the period; and
•estimates of the present value of future cash flows for claims and expenses released from the LRC because of incurred insurance service expense in the period.
The Company determines the systematic allocation of insurance service expenses incurred based on the percentage of loss component to the total outflows included in the LRC, excluding any investment component amount.
Any subsequent decreases relating to future service in fulfilment cash flows allocated to the group arising from changes in estimates of future cash flows and the risk adjustments for non-financial risk are allocated first only to the loss component, until it is exhausted. Once it is exhausted, any further decreases in fulfilment cash flows relating to future service create the group’s CSM.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.8 Measurement of insurance contracts issued (continued)
2.8.2 Subsequent measurement of contracts not measured under the PAA (continued)
Measurement of contracts under the PAA
On initial recognition the Company applies the PAA:
•When the coverage period of each insurance contract in the group is one year or less;
•For groups of insurance contracts including contracts with a coverage period extending beyond one year the Company reasonably expects that such simplification would produce a measurement of the LRC for the group that would not differ materially from the one that would be produced applying the requirements of the general measurement model.
On initial recognition, the Company measures the LRC at the amount of premiums received in cash. As all the issued insurance contracts to which the PAA is applied have coverage of a year or less, the Company has elected the policy of expensing insurance acquisition cash flows as they are incurred.
On initial recognition of each group of contracts, the Company expects that the time between providing each part of the services and the related premium due date is no more than a year. Accordingly, the Company has chosen not to adjust the liability for remaining coverage to reflect the time value of money and the effect of financial risk.
There are no investment components within insurance contracts issued that are measured under the PAA.
The carrying amount of a group of insurance contracts issued at the end of each reporting period is the sum of (a) the LRC and (b) the LIC, comprising the FCF related to past service allocated to the group at the reporting date.
The carrying amount of the LRC for subsequent measurement purposes is increased by any premiums received and decreased by the amount recognised as insurance revenue for services provided.
The LIC is measured similarly to the LIC’s measurement under the GMM. The liability equals the amount of the fulfilment cash flows relating to incurred claims. For claims that the Company expects to be paid within one year or less from the date of incurring the Company does not adjust future cash flows for the time value of money and the effect of financial risk. However, claims expected to take more than one year to settle are discounted.
If facts and circumstances indicate that a group of insurance contracts measured under the PAA is onerous on initial recognition or becomes onerous subsequently, the Company increases the carrying amount of the LRC to the amount of the FCF determined under the GMM with the amount of such an increase recognised in insurance service expenses, and a loss component is established for the amount of the loss recognised. The fulfilment cash flows are discounted at current rates, as the liability for incurred claims is also discounted.
2.9 Measurement of reinsurance contracts held
The same accounting policies will be applied as for insurance contracts issued to measure a group of reinsurance contracts held, adapted where necessary to reflect features that differ from those of insurance contracts.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.9 Measurement of reinsurance contracts held (continued)
2.9.1 Measurement of the asset for remaining coverage (“ARC”)
Reinsurance contracts measured under the general model
The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following:
•Measurement of the cash flows include an allowance on a probability-weighted basis for the effect of any non-performance by the reinsurers, including the effects of collateral and losses from disputes;
•The Company determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer;
•The Company recognises both day 1 gains and day 1 losses at initial recognition in the statement of financial position as a CSM and releases this to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition as described below;
•Changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts have been recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM.
The Company measures the estimates of the present value of future cash flows using assumptions that are consistent with those used to measure the estimates of the present value of future cash flows for the underlying insurance contracts.
On initial recognition, the CSM of a group of reinsurance contracts represents a net cost or net gain on purchasing reinsurance. It is measured as the equal and opposite amount of the total of (a) the fulfilment cash flows, (b) any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group, (c) any cash flows arising at that date and (d) any income recognised in profit or loss because of onerous underlying contracts recognised at that date.
However, if any net cost on purchasing reinsurance coverage relates to insured events that occurred before the purchase of the group, then the Company recognises the cost immediately in profit or loss as an expense.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the year, adjusted for:
•the CSM of any new contracts that are added to the group in the year;
•interest accreted on the carrying amount of the CSM during the year, measured at the discount rates determined on initial recognition;
•income recognised in profit or loss in the year on initial recognition of onerous underlying contracts;
•reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group of reinsurance contracts;
•changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition, unless they result from changes in fulfilment cash flows of onerous underlying contracts, in which case they are recognised in profit or loss and create or adjust a loss-recovery component;
•the effect of any currency exchange differences on the CSM; and
•the amount recognised in profit or loss because of the services received in the year.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.9 Measurement of reinsurance contracts held (continued)
2.9.1 Measurement of the asset for remaining coverage (“ARC”) (continued)
Reinsurance contracts measured under the general model (continued)
For a group of reinsurance contracts covering onerous underlying contracts, the Company establishes a loss-recovery component of the asset for remaining coverage, adjusts the CSM and as a result recognises income when it recognises a loss on initial recognition of onerous underlying contracts, if the reinsurance contract is entered into before or at the same time as the onerous underlying contracts are recognised. The adjustment to the CSM is determined by multiplying:
•the amount of the loss that relates to the underlying contracts; and
•the percentage of claims on the underlying contracts that the Company expects to recover from the reinsurance contracts.
The loss-recovery component is adjusted for changes in FCFs of the group of reinsurance contracts relating to future services that result from changes in FCFs of the onerous underlying contracts. If the reinsurance contract covers only some of the insurance contracts included in an onerous group of contracts, then the Company uses a systematic and rational method to determine the portion of losses recognised on the onerous group of contracts that relates to underlying contracts covered by the reinsurance contract.
The loss-recovery component determines the amounts that are subsequently presented in profit or loss as reversals of recoveries of losses from the reinsurance contracts and are excluded from the allocation of reinsurance premiums paid. It is adjusted to reflect changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss component of the onerous group of underlying contracts that the Company expects to recover from the reinsurance contracts.
Reinsurance contracts measured under the Premium Allocation Approach
The Company applies the PAA to measure a group of reinsurance contracts using the same accounting policies to the insurance contracts, as adapted where necessary to reflect the features of reinsurance contracts.
The Company applies the PAA to reinsurance contracts that it holds, as follows:
•to groups of reinsurance contracts that it holds which at the inception of the group the effective coverage period of each contract in the group of reinsurance contracts held is one year or less;
•to groups of reinsurance contracts that it holds including contracts with a coverage period extending beyond one year when the Company reasonably expects that such simplification would produce a measurement of the asset for remaining coverage for the group that would not differ materially from the one that would be produced applying the requirements of the general measurement model.
Under the PAA, the initial measurement of the asset equals the reinsurance premium paid. The Company measures the amount relating to remaining service by allocating the amount of expected reinsurance premium payments over the coverage period of receiving services for the group. For all reinsurance contracts held the allocation is based on the passage of time.
On initial recognition of each group of reinsurance contracts held, the Company expects that the time between receiving each part of the services and the related reinsurance premium due date is no more than a year. Accordingly, the Company has chosen not to adjust the asset for remaining coverage to reflect the time value of money and the effect of financial risk.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.9 Measurement of reinsurance contracts held (continued)
2.9.1 Measurement of the asset for remaining coverage (“ARC”) (continued)
Reinsurance contracts measured under the Premium Allocation Approach (continued)
Where the reinsurance contracts held cover a group of onerous underlying insurance contracts, the Company adjusts the carrying amount of the asset for remaining coverage and recognises a gain when, in the same period, it reports a loss on initial recognition of an onerous group of underlying insurance contracts or on additional loss from an already onerous group of underlying insurance contracts. The recognition of this gain results in the accounting for the loss recovery component of the asset for the remaining coverage of a group of reinsurance contracts held. The loss-recovery component is adjusted to reflect changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss component of the onerous group of underlying contracts that the Company expects to recover from the reinsurance contracts.
2.9.2 Measurement of the asset for incurred claims (“AIC”)
The Company uses consistent assumptions to measure the estimates of the present value of future cash flows for the group of reinsurance contracts held and the estimates of the present value of future cash flows for the group(s) of underlying insurance contracts. The Company includes in the estimates of the present value of the future cash flows for the group of reinsurance contracts held the effect of any risk of non-performance by the issuer of the reinsurance contract, including the effects of collateral and losses from disputes.
The risk adjustment for non-financial risk for reinsurance contracts held represents the amount of risk being transferred by the Company to the reinsurer.
2.10 Insurance contracts – modification and derecognition
The Company derecognises insurance contracts when, and only when:
•The rights and obligations relating to the contract are extinguished (i.e., discharged, cancelled or expired); or
•The contract is modified such that the modification results in:
-the contract being outside the scope of IFRS 17;
-a different insurance contract due to separating components from the host contract;
-a substantially different contract boundary;
-the contract being included in a different group of contracts.
If any of the modification criteria described above are met, the Company derecognises the initial contract and recognises the modified contract as a new contract.
On derecognition of a contract from within a group of contracts:
•the fulfilment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations derecognised;
•the CSM of the group is adjusted for the change in the fulfilment cash flows, except where such changes are allocated to a loss component; and
•the number of coverage units for the expected remaining services is adjusted to reflect the coverage units derecognised from the group.
If a contract is derecognised because it is transferred to a third party, then the CSM is also adjusted for the premium charged by the third party, unless the group is onerous.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.10 Insurance contracts – modification and derecognition (continued)
If a contract is derecognised because its terms are modified, then the CSM is also adjusted for the premium that would have been charged had the Company entered into a contract with the new contract’s terms at the date of modification, less any additional premium charged for the modification. The new contract recognised is measured assuming that, at the date of modification, the Company received the premium that it would have charged less any additional premium charged for the modification.
If the contract modification does not meet the above conditions the Company treats the effect of the modification as changes in the estimates of fulfilment cash flows.
For insurance contracts accounted for applying the PAA the Company adjusts insurance revenue prospectively from the time of the contract modification.
2.11 Investment contracts with discretionary participation features
The Company recognises investment contracts with DPF at the date when the Company becomes a party to the contract. The investment contracts with DPF are aggregated in the same manner as insurance contracts. The Company identified portfolios of such investment contracts with DPF. Within that portfolio, the Company aggregated them based on three expected profitability levels (groups of onerous contracts, groups of contracts that have no significant possibility of becoming onerous subsequently, and groups that are neither onerous nor have no significant possibility of becoming onerous subsequently). Groups comprise of contracts issued not more than a year apart.
At initial recognition, similar to insurance contracts, the Company estimates the fulfilment cash flows based on the present value of expected future cash flows and a risk adjustment for non-financial risk. Any expected net inflows are accounted for as the initial CSM.
In estimating future cash flows, the Company considers the contract boundary which only includes cash flows if they result from a substantive obligation of the Company to deliver cash at a present or future date.
In estimating the risk adjustment for non-financial risk for investment contracts with DPF, the Company considers other non-financial risks, such as the risks arising from the contract holder behaviour, e.g. lapse risk and expense risk.
The Company discounts cash flows using discount rates that reflect the characteristics of the fulfilment cash flows, including the extent of their dependency on the fair value of the underlying items.
The Company allocates the CSM over the group’s whole duration period in a systematic way reflecting the transfer of investment services under a contract. The Company measures investment contracts with DPF at initial recognition as detailed in “Measurement on initial recognition of contracts not measured under the PAA” and at subsequent measurement in accordance to “Subsequent measurement of contracts not measured under PAA” and “Adjustments to the CSM – Insurance contracts with direct participation features”.
2.12 Presentation
The Company presents separately, in the statement of financial position, the carrying amount of portfolios of:
1.insurance contracts and investment contracts with DPF issued that are assets;
2.insurance contracts and investment contracts with DPF issued that are liabilities;
3.reinsurance contracts held that are assets;
4.reinsurance contracts held that are liabilities.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.12 Presentation (continued)
Any assets or liabilities for insurance acquisition cash flows recognised before the corresponding insurance contracts are included in the carrying amount of the related portfolio of contracts.
The Company disaggregates the total amount recognised in the statement of profit or loss and other comprehensive income into an insurance service result, comprising insurance revenue and insurance service expense, and insurance finance income or expenses.
The Company does not disaggregate the change in risk adjustment for non-financial risk between a financial and non-financial portion and includes the entire change as part of the insurance service result.
The Company separately presents income or expenses from reinsurance contracts held from the expenses or income from insurance contracts and investments contracts with DPF issued.
2.12.1 Insurance Service Revenue
Contracts not measured under the PAA
The Company’s insurance revenue depicts the provision of coverage and other services arising from a group of insurance contracts and investment contracts with DPF at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Insurance revenue from a group of insurance contracts and a group of investment contracts with DPF is therefore the relevant portion for the period of the total consideration for the contracts, (i.e., the amount of premiums paid to the Company adjusted for financing effect (the time value of money) and excluding any investment components).
The total consideration for a group of contracts covers amounts related to the provision of services and is comprised of:
•Insurance service expenses, excluding any amounts allocated to the loss component of the liability for remaining coverage;
•The risk adjustment for non-financial risk related to current service, excluding any amounts allocated to the loss component of the liability for remaining coverage;
•The CSM release measured based on coverage units provided.
In addition, the Company allocates a portion of premiums that relate to recovering insurance acquisition cash flows to each period in a systematic way based on the passage of time. The Company recognises the allocated amount, as insurance service revenue and an equal amount as insurance service expenses.
The amount of the CSM of a group of insurance contracts and a group of investment contracts with DPF that is recognised as insurance revenue in each year is determined by identifying the coverage units in the group, allocating the CSM remaining at the end of the year (before any allocation) equally to each coverage unit provided in the year and expected to be provided in future years, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the year. The number of coverage units is the quantity of services provided by the contracts in the group, determined by considering for each contract the quantity of benefits provided and its expected coverage period. The coverage units are reviewed and updated at each reporting date.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.12 Presentation (continued)
2.12.1 Insurance Service Revenue (continued)
Contracts not measured under the PAA (continued)
Services provided by insurance contracts include insurance coverage and, for all direct participating contracts, investment services for managing underlying items on behalf of policyholders. In addition, some contracts without direct participating features may also provide investment services for generating an investment return for the policyholder, if and only if:
•an investment component exists or the policyholder has a right to withdraw an amount (e.g. the policyholder’s right to receive a surrender value on cancellation of a contract);
•the investment component or withdrawal amount is expected to include an investment return; and
•the Company expects to perform investment activities to generate that investment return.
The expected coverage period reflects expectations of lapses and cancellations of contracts, as well as the likelihood of insured events occurring to the extent that they would affect the expected coverage period. The period of investment services ends no later than the date on which all amounts due to current policyholders relating to those services have been paid.
Contracts measured under the PAA
For contracts measured under the PAA, the insurance revenue for each period is the amount of expected premium receipts for providing services in the period. The Company recognises such insurance revenue based on the passage of time by allocating premium receipts including premium experience adjustments to each period of service.
2.12.2 Loss Component
The Company groups contracts that are onerous at initial recognition separately from contracts in the same portfolio that are not onerous at initial recognition. Groups that were not onerous at initial recognition can also subsequently become onerous if assumptions and experience changes. The Company has established a loss component of the liability for remaining coverage for any onerous group depicting the future losses recognised.
2.12.3 Insurance Service Expenses
Insurance service expenses arising from insurance contracts and investments contracts with DPF are recognised in profit or loss generally as they are incurred. They exclude repayments of investment components and comprise of:
-Incurred claims and other insurance service expenses: For some life risk contracts, incurred claims also include premiums waived on detection of critical illness;
-Amortisation of insurance acquisition cash flows: For contracts not measured under the PAA, this is equal to the amount of insurance revenue recognised in the year that relates to recovering insurance acquisition cash flows. For contracts measured under the PAA, the Company has elected to expense insurance acquisition cash flows as incurred;
-Losses on onerous contracts and reversals of such losses;
-Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and changes therein.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.12 Presentation (continued)
2.12.4 Insurance finance income and expense
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts and investment contracts with DPF arising from:
•The effect of the time value of money and changes in the time value of money;
•The effect of financial risk and changes in financial risk.
For contracts without direct participation features, insurance finance income or expenses reflect interest accreted on the future cash flows and the CSM and the effect of changes in interest rates and other financial assumptions.
For contracts with direct participation features, insurance finance income or expenses comprise changes in the measurement of the groups of contracts caused by changes in the value of underlying items (excluding additions and withdrawals), interest accreted and the effect of changes in interest rated on future cash flows that do not vary with returns on underlying items.
For contracts measured under the PAA insurance finance or expenses reflect interest accreted on the future cash flows under the LIC and the effect of changes in interest rates and other financial assumptions.
The Company does not disaggregate changes in the risk adjustment for non-financial risk between insurance service result and insurance financial income or expenses.
The Company has an accounting policy choice to either present all of the period’s insurance finance income or expenses in profit or loss or to split the amount between profit or loss and other comprehensive income (OCI). The accounting policy choice is applied on a portfolio-by-portfolio basis. The Company will include all insurance finance income or expenses for the reporting period in profit or loss for all its portfolios.
2.12.5 Net income or expense from reinsurance contracts held
Net expenses from reinsurance contracts comprise an allocation of reinsurance premiums paid less amounts recovered from reinsurers.
The Company presents separately on the face of the statement of profit or loss and other comprehensive income the amounts expected to be recovered from reinsurers, and an allocation of the reinsurance premiums paid.
The Company treats reinsurance cash flows that are contingent on claims on the underlying contracts as part of the claims that are expected to be reimbursed under the reinsurance contract held. Ceding commissions that are not contingent on claims of the underlying contracts are presented as a deduction in the premiums to be paid to the reinsurer which is then allocated to profit or loss.
2.13 Transition
Changes in accounting policies resulting from the adoption of IFRS 17 were applied using the full retrospective approach to the extent practicable, except as described below.
Contracts measured under the PAA
The Company applied the full retrospective approach on transition for all groups of insurance and reinsurance contracts containing contracts with short-term coverage period not extending beyond one year. For these short- term contracts it was concluded that reasonable and supportable information that is necessary to apply the full retrospective approach is available.
Material accounting policies (continued)
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2.Insurance contracts (continued)
2.13 Transition (continued)
Contracts measured under the PAA (continued)
Applying the full retrospective approach, the Company has:
-identified, recognised and measured each group of insurance contracts as if IFRS 17 had always applied;
-identified, recognised and measured any assets for insurance acquisition cash flows as if IFRS 17 had always applied;
-derecognised previously reported balances that would not have existed if IFRS 17 had always been applied;
-and recognised any resulting net difference in equity.
Contracts not measured under the PAA
Changes in accounting policies resulting from the adoption of IFRS 17 for all groups of insurance contracts, investment contracts with DPF and reinsurance contracts containing contracts with long-term coverage period extending beyond one year are applied using the fair value transition approach. Obtaining reasonable and supportable information to apply the full retrospective approach, for these contracts, was impracticable without undue cost or effort. Under this method these groups of contracts on transition date, 1 January 2022, are measured at fair value, any existing balances that would not exist had IFRS 17 applied are derecognised and the resulting net difference is recognised in equity.
Under the fair value approach, the CSM (or the loss component) at 1 January 2022 was determined as the difference between the fair value of a group of contracts at that date and the fulfilment cash flows at that date. In determining fair value, the Company has applied the requirements of IFRS 13 Fair Value Measurement, except for the demand deposit floor requirement, as is prescribed by IFRS 17. Specifically, the fair value of the insurance contracts was measured as the sum of (a) the present value of the net cash flows expected to be generated by the contracts, determined using a discounted cash flow technique; and (b) an additional margin, determined using a cost of capital technique.
Differences in the Company's approach to measuring fair value from the IFRS 17 requirements for measuring fulfilment cash flows gave rise to a CSM at 1 January 2022. In particular, in measuring fair value the Company includes a margin comprising a risk premium to reflect what market participants demanded as compensation for the uncertainty inherent in the cash flows and a profit margin to reflect what market participants would require assuming the obligations to service the insurance contracts. In determining this margin, the Company has considered certain costs that are not directly attributable to fulfilling the contracts (e.g. general overheads) and certain risks that were not reflected in the fulfilment cash flows, among other factors that a market participant would consider.
When applying the fair value transition approach the Company aggregated contracts issued more than one year apart.
For the application of the fair value approach, the Company has not used the permitted modification to use reasonable and supportable information available at the transition date and instead used information available at the date of inception or initial recognition in order to determine whether any contracts are direct participating contracts. Despite this, the Company used the permitted modification to use reasonable and supportable information available at the transition date to identify groups of contracts.
The discount rate when applying the fair value approach was determined at the transition date.
Material accounting policies (continued)
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3.Basis of consolidation
On acquisition of a portfolio of long-term contracts, the net present value of the shareholders’ interest in the expected after-tax cash flows of the in-force business is capitalised in the statement of financial position as an asset. The value of in-force business is subsequently determined by the Directors on an annual basis, based on the advice of the approved actuary. The valuation represents the discounted value of projected future transfers to shareholders from policies in force at the year end, after making 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 are assumed to vary depending on the mix of investments held and expected market conditions. All movements in the in-force business valuation are credited or debited to other reserves.
4.Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.
5.Acquisition of subsidiaries
The acquisition of subsidiaries that are not under common control is accounted for by applying the acquisition method. The consideration is measured as the aggregate of the fair values, at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred, except for costs to issue debt or equity securities.
The acquiree’s identifiable assets and liabilities that meet the conditions for recognition are recognised at their fair values at the acquisition date, except as specifically required by other International Financial Reporting Standards as adopted by the EU. A contingent liability assumed in a business combination is recognised at the acquisition date if there is a present obligation that arises from past events and its fair value can be measured reliably.
The results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where necessary, in preparing these consolidated financial statements, appropriate adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by group entities. Intra-group balances, transactions, income and expenses are eliminated on consolidation.
6.Intangible assets
(a)Computer software
Acquired computer software licences 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 estimated useful lives (between five and thirteen years). Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.
Material accounting policies (continued)
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6.Intangible assets (continued)
(b)Goodwill
Goodwill arising in a business combination that is accounted for using the acquisition method is recognised as an asset at the date that control is acquired. Goodwill is measured as the excess of (a) the aggregate of: (i) the consideration transferred; (ii) the amount of any non-controlling interests in the acquiree; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; and (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Any gain on a bargain purchase, after reassessment, is recognised immediately in profit or loss.
(c)Passporting assets
Separately acquired passporting assets are shown at historical cost, which represent their acquisition price. Passporting assets have an indefinite useful life because management assesses that there is no foreseeable limit to the period over which the domain assets are expected to generate net cash inflows for the group.
7.Property, plant and equipment
Property, plant and equipment comprising land and buildings and office furniture, fittings and equipment are initially recorded at cost, and are subsequently shown at cost less accumulated depreciation and impairment losses, with the exception of land which is shown at cost. 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. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful lives using the following depreciation rates:

| %
Buildings | 2-20
Office furniture, fittings and equipment | 20-25

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each report period. Gains and losses on disposals of plant and equipment are determined by comparing proceeds with the carrying amount, and are taken into account in determining operating profit. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
8.Investment property
Freehold and leasehold properties treated as investments principally comprise buildings that are held for long term rental yields or capital appreciation or both, and that are not occupied by the Group. Investment property is initially measured at cost including related transaction costs. Investment property is subsequently carried at fair value, representing open market value determined annually by external valuers or by virtue of a directors’ valuation. It is the Group’s policy to engage the services of an external expert valuer every two years at a minimum. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset.
Material accounting policies (continued)
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8.Investment property (continued)
If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.
Subsequent expenditure is charged to the asset’s carrying amount 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. All other repairs and maintenance costs are charged to the profit and loss account during the financial period in which they are incurred.
Unrealised gains and losses arising from changes in fair value (net of deferred taxation) are initially recognised in profit or loss.
9.Other financial instruments
Policy applicable as from 1 January 2023
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially recognised at their fair value, except for trade receivables that do not have a significant financing component which are measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial assets and financial liabilities are off-set and the net amount presented in the statement of financial position when the Group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.
Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial assets
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
•The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;
•The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Classification of financial assets (continued)
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
•The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets;
•The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Group may make the following irrevocable election / designation at initial recognition of a financial asset:
•The Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met; and
•The Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
Regular way purchases or sales of financial assets are recognised and derecognised on trade date.
An assessment of business models for managing financial assets is fundamental to the classification of a financial asset. The Group determines the business models at a level that reflects how groups of financial assets are managed together to achieve a particular business objective.
The Group’s business model does not depend on management’s intentions for an individual instrument, therefore the business model assessment is performed at a higher level of aggregation rather than on an instrument-by-instrument basis. The information considered includes: (a) the stated policies and objectives for the portfolio and the operation of those policies in practice; (b) how the performance of the portfolio is evaluated and reported to the Company’s management; (c) the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; (d) how managers of the business are compensated; and (e) the frequency, value and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
The Group classifies its financial assets into the following two categories: a) financial assets at fair value through profit or loss, and b) financial assets at amortised cost.
Debt instruments measured at amortised cost
The following financial assets are classified within this category – trade receivables, cash at bank, intercompany balances.
Appropriate allowances for expected credit losses (‘ECLs’) are recognised in profit or loss in accordance with the Group’s accounting policy on ECLs.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Debt instruments measured at amortised cost (continued)
Changes in the carrying amount as a result of foreign exchange gains or losses, impairment gains or losses and interest income are recognised in profit or loss. On derecognition, any difference between the carrying amount and the consideration received is recognised in profit or loss and is presented separately in the line item ‘Gains and losses arising from the derecognition of financial assets measured at amortised cost’.
Interest income is recognised using the effective interest method and is included in the line item ‘Investment income’.
Trade receivables which do not have a significant financing component are initially measured at their transaction price and are subsequently stated at their nominal value less any loss allowance for ECLs.
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL, specifically:
-investments in equity instruments are classified as at FVTPL. However, a Group may designate an equity investment that is neither held for trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition;
-debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria are classified as at FVTPL.
In addition, debt instruments that meet either the amortised cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
Financial assets measured at FVTPL are subsequently measured at fair value at the end of each reporting period, with any fair value gains or losses including foreign exchange gains and losses, recognised in profit or loss.
Where applicable, dividend income is recognised with other dividend income, if any, arising on other financial assets within the line item ‘Investment income’. Where applicable, interest income is disclosed within the line item ‘Investment income’. Fair value gains and losses are recognised within the line items ‘Investment income’ and ‘Investment losses’ respectively.
Interest income using the effective interest method
Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. For financial instruments other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding ECLs, through the expected life of the debt instrument, or where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Expected Credit Losses
The Group recognises a loss allowance for ECLs on, debt instruments measured at amortised cost, intercompany receivables, trade receivables and cash at bank.
The amount of ECL is updated at each reporting date to reflect changes in credit risk since the initial recognition.
For trade receivables that do not contain a significant financing component (or for which the IFRS 15 practical expedient for contracts that are one year or less is applied), the Group applies the simplified approach and recognises lifetime ECL.
Where a collective basis is applied (see the Accounting Policy entitled ‘Collective basis’ below), the ECLs on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience based on the past due status of the debtors, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
For all other financial instruments, the Group uses the general approach and recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL (‘12m ECL’). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset being credit-impaired at the reporting date or an actual default occurring.
Lifetime ECL represents the ECLs that will result from all possible default events over the expected life of a financial instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period, but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to 12m ECL at the current reporting date.
The Group recognises an impairment gain or loss in profit or loss for all financial assets with a corresponding adjustment to their carrying amount.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group and Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group and Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort and, where applicable, the financial position of the counterparties.
The Group and Company regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Significant increase in credit risk (continued)
Forward-looking information considered includes the future prospects of the industries in which the Group and Company’s debtors operate as obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Company’s core operations.
Irrespective of the outcome of the above assessment, the Group and Company presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group and Company has reasonable and supportable information, that is available without undue cost or effort, that demonstrates otherwise.
The Group and Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that receivables that meet either of the following criteria are generally not recoverable:
-when there is a breach of financial covenants by the counterparty; or
-information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group and Company, in full (without taking into account any collateral held by the Group and Company).
Irrespective of the above analysis, the Group and Company considers that default has occurred when a financial asset is more than 90 days past due unless the Group and Company has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred.
Evidence that a financial asset is credit-impaired includes observable data about the following events:
(i)significant financial difficulty of the issuer or the borrower;
(ii)a breach of contract, such as a default or past due event;
(iii)the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
(iv)it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
(v)the disappearance of an active market for that financial asset because of financial difficulties.
Write-off policy
The Group and Company writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, whichever occurs sooner.
Financial assets written off may still be subject to enforcement activities under the Group and Company’s recovery procedures, taking into account legal advice where appropriate. Recoveries made are recognised in profit or loss as impairment gains.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Measurement and recognition of ECLs
For financial assets, the credit loss is the difference between all contractual cash flows that are due to the Group and Company in accordance with the contract and all the cash flows that the Group and Company expects to receive, discounted at the original effective interest rate. ECLs represent the weighted average of credit losses with the respective risks of a default occurring as the weights.
The measurement of ECLs is a function of:
-the probability of default, which is an estimate of the likelihood of default over a given time horizon estimated at a point in time;
-the loss given default, which is an estimate of the loss arising on default, taking into into consideration the cash flows expected from collateral and other credit enhancements that are part of the contractual terms and are not recognised separately;
-the exposure at default, which is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date that are permitted by the current contractual terms, including amortisation profiles and early repayment or overpayment.
The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information, where applicable. Where applicable, the financial position of the counterparties is also taken into consideration.
Where applicable, forward-looking information considered includes the future prospects of the industries in which the Group and Company’s debtors operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group and Company’s core operations.
Collective basis
If evidence of a significant increase in credit risk at the individual instrument level is not yet available, the Group and Company performs the assessment of significant increases in credit risk on a collective basis by considering information on, for example, a group or sub-group of financial instruments.
Where the Group and Company does not have reasonable and supportable information that is available without undue cost or effort to measure lifetime ECL on an individual instrument basis, lifetime ECL is measured on a collective basis.
In such instances, the financial instruments are grouped on the basis of shared credit risk characteristics, as follows:
-Nature of financial instruments;
-Past-due status;
-Nature, size and industry of debtors;
-Nature of collaterals for finance lease receivables;
-External credit ratings where available;
-Date of initial recognition;
-Remaining term to maturity;
-Geographical location of the borrower;
-The value of collateral relative to the financial asset if it has an impact on the probability of default occurring (for example, loan-to-value ratios).
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial assets (continued)
Collective basis (continued)
The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.
Financial liabilities and equity
Trade payables are classified with current liabilities and are stated at their amortised cost using the EIR method.
Ordinary shares issued by the Group are classified as equity instruments.
Policy applicable before 1 January 2023
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially recognised at their fair value plus directly attributable transaction costs for all financial assets or financial liabilities not classified at fair value through profit or loss.
Financial assets and financial liabilities are off-set and the net amount presented in the statement of financial position when the Group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.
Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
(i)Trade receivables
Trade receivables are classified with current assets and are stated at their nominal value.
(ii)Investments
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. The directors determine the appropriate classification of the Group’s financial assets at initial recognition, and re-evaluate such designation at every reporting date.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(ii)Investments (continued)
(a)Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A non-derivative financial asset is classified into this category at inception if acquired principally for the purpose of selling in the near-term, if it forms part of a portfolio of financial assets that are managed together and for which there is evidence of short term profit-taking, if the financial asset is part of a group of financial assets that is managed on a portfolio basis and whose performance is evaluated and reported internally to the Group’s key management personnel on a fair value basis in accordance with a documented financial assets strategy or if this designation eliminates an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
(b) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity other than those that upon initial recognition are designated as at fair value through profit or loss, those that are designated as available-for-sale financial assets and those that meet the definition of loans and receivables are classified as held-to-maturity investments. After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (“EIR”) method, less impairment. Amortised costs are calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income.
(c)Loans and receivables
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 intends to sell in the short term or that it has designated as fair value through profit or loss or as available-for-sale financial assets. They include, inter alia, debtors and interest-bearing deposits and advances.
(d)Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are either designated in this category by the Group or not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
All purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase or sell the assets. All financial assets are initially recognised at fair value, plus in the case of financial assets not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where they have been transferred and the transfer qualifies for derecognition.
Financial assets at fair value through profit or loss are subsequently re-measured at fair value. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are recognized in the profit and loss.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(ii)Investments (continued)
(d)Available-for-sale financial assets (continued)
Available-for-sale financial assets are measured at their fair value. Gains and losses arising from a change in fair value are recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary assets, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. Interest calculated using the effective interest method is recognised in profit or loss.
Loans and receivables are carried at amortised cost using the EIR method, less any provision for impairment.
The fair value of quoted financial assets is based on quoted market prices at the end of the reporting period. If the market for a financial asset is not active (and for unlisted securities), 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 and discounted cash flow analysis.
Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are not designated as at fair value through profit or loss. The fair value of investments in equity instruments that do not have a quoted price in an active market for an identical instrument is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that instrument; or (b) the probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. Investments in equity instruments that do not have a quoted price in an active market and whose fair value cannot be reliably measured are measured at cost.
(iii)Trade payables
Trade payables are classified with current liabilities and are stated at their amortised cost using the EIR method.
(iii)Shares issued by the Group
Ordinary shares issued by the Group are classified as equity instruments.
Impairment of assets
a)Impairment of financial assets at amortised cost and available-for-sale investments
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.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(iii)Shares issued by the Group (continued)
Impairment of assets (continued)
a)Impairment of financial assets at amortised cost and available-for-sale investments (continued)
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 debtors;
(ii)a breach of contract, such as a default or delinquency in payments;
(iii)it is becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganisation; and
(iv)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.
In addition to the above loss events, objective evidence of impairment for an investment in an equity instrument includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered and/or a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. For financial assets at amortised cost, 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 loss. 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 statement of comprehensive income.
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 and loss account.
When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative impairment loss that had been recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment and is measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.
Material accounting policies (continued)
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9.Other financial instruments (continued)
Policy applicable as from 1 January 2023 (continued)
Financial liabilities and equity (continued)
(iii)Shares issued by the Group (continued)
Impairment of assets (continued)
a)Impairment of financial assets at amortised cost and available-for-sale investments (continued)
Impairment losses recognised in profit or loss for an available-for-sale investment in an equity instrument are not reversed through profit or loss. Impairment losses recognised in profit or loss for an available-for-sale investment in a debt instrument are reversed through profit or loss if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.
b)Impairment of other financial assets
At the end of each reporting period, the carrying amount of other financial assets is reviewed to determine whether there is an indication of impairment and if any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is the amount by which the amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. Impairment losses and reversals are recognised in profit or loss.
c)Impairment of non-financial assets
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, principally comprise property, plant and equipment and computer software. 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 cash flows (cash-generating units). An impairment loss recognised in a prior year is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Impairment losses and reversals are recognised in profit or loss.
10.Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, demand deposits and time deposits maturing within three months from the end of the reporting period.
11.Dividend distribution
Dividend distribution to the Group’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are declared by the directors in the case of interim dividends or are approved by the shareholders in the case of final dividends.
12.Provisions
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 of the obligation can be made. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
Material accounting policies (continued)
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13.Revenue recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.
Revenue also includes interest, dividend and rental income and is recognised as follows:
a)Rendering of services
Premium recognition, dealing with insurance contracts and investments contracts with DPF is described in accounting policy 10. Revenue arising from the issue of investment contracts without DPF is recognised in the accounting period in which the services are rendered.
b)Insurance agency commissions
Insurance agency commissions earned on policies sold are taken to the income statement in full, irrespective of the period covered by the policy.
c)Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
d)Interest income
Interest income from financial assets not classified as fair value through profit or loss is recognised using the effective interest method.
e)Rental income
Rental income from the leasing of immovable property is recognised on a straight-line basis over the lease term.
14.Investment return
Investment return includes dividend income, net fair value movements on financial assets at fair value through profit or loss (including interest income from financial assets classified as fair value through profit or loss), interest income from financial assets not classified as fair value through profit or loss, rental receivable, net fair value movements on investment property and is net of investment expenses, charges, and interest.
15.Foreign currencies
a)Functional and presentation currency
Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Euro, which is the Group’s functional and presentation currency.
Material accounting policies (continued)
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15.Foreign currencies (continued)
b)Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transactions. 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. Non-monetary assets and liabilities denominated in currencies other than the functional currency that are measured at fair value are re-translated using the exchange rate ruling on the date the fair value was measured. Non-monetary assets and liabilities denominated in currencies other than the functional currency that are measured in terms of historical cost are not re-translated. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period, except for differences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.
16.Leases
(i)Group as a lessor
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 ‘rental income’ – Note 5.
(ii)Group 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.
Right-of-use asset
The Group recognises a right-of-use asset 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 Group presents right-of-use asset that do not meet the definition of investment property as ‘Right-of-use assets’.
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.
Material accounting policies (continued)
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16.Leases (continued)
(ii)Group as a lessee (continued)
Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate ("IBR") to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.
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.
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.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
17.Taxation
Current tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the current tax is also dealt with in other comprehensive income or in equity, as appropriate. Current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit or loss because it excludes items which are non-assessable or disallowed and it further excludes items which are taxable or deductible in other periods. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised only to the extent that future taxable profit will be available such that realisation of the related tax benefit is probable.
Notes to the financial statements
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1.Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated and based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.
In the opinion of the Directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1 (revised), unless further described below.
(a)Insurance contracts
Definition and classification
The Company has applied judgment to determine whether contracts are within the scope of IFRS 17 and, for contracts determined to be within the scope of IFRS 17, what measurement model is applicable, as explained below.
•The Company issues certain contracts that do not transfer significant insurance risk and classifies such contracts as investment contracts with DPF. In assessing whether these are within the scope of IFRS 17, the Company assessed if the discretionary amount is a significant amount of the total benefits;
•Contracts determined to be within the scope of IFRS 17 are assessed on whether they meet the definition of an insurance contract with direct participation features (subject to IFRS 17 criteria). The savings (unit-linked), the non-linked contracts with profit sharing and the investment contracts with DPF issued by the Company are classified as direct participation contracts;
•For the proportional group life reinsurance contracts on a risk-attaching basis the Company elects to apply the PAA if at the inception of the group the Company reasonably expects that it will provide a liability/asset for remaining coverage that would not differ materially from the general model. The Company applies its judgement in determining whether the PAA eligibility criteria are met at initial recognition.
Insurance contracts unit of account
The Company is required to aggregate insurance contracts issued on initial recognition into groups of onerous contracts, groups of contracts with no significant possibility of becoming onerous, and groups of other contracts. Concerning the life long-term contracts, the Company has applied its judgment on initial recognition to distinguish between non-onerous contracts (those having no significant possibility of becoming onerous) and other contracts by assessing the likelihood of adverse changes in assumptions that might result in contracts becoming onerous.
For short-term group life contracts measured under the PAA, management judgement is required to assess whether facts and circumstances indicate that a group of contracts is onerous at initial recognition or has become onerous subsequently and whether any loss component measurement is required. In 2023 and 2022, the Company did not identify any facts or circumstances that might have indicated that a group of contracts measured under the PAA had become onerous.
Notes to the financial statements (continued)
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1.Critical accounting estimates and judgements (continued)
(a)Insurance contracts (continued)
Measurement of future cash flows
The measurement of a group of insurance contracts includes all the future cash flows arising within the contract boundary. In determining which cash flows fall within a contract boundary, the Company considers its substantive rights and obligations arising from the terms of the contract, and also from applicable law and regulation. Cash flows are considered to be outside of the contract boundary if the Company has the practical ability to reprice existing contracts to reflect their reassessed risks and if the contract’s pricing for coverage up to the date of reassessment considers only the risks till that next reassessment date.
The following assumptions were used when estimating future cash flows:
•Mortality and morbidity rates
Mortality and morbidity risks are inherent in most lines of business. The Company performs an investigation, at least on an annual basis, to ensure the validity of the mortality assumptions, and when deemed necessary the assumptions are adjusted accordingly. The assumptions are set based on the internal experience of the Company when there are sufficient volumes of data to support a credible investigation. When internal experience is not sufficient, the assumptions are set with reference to industry experience and commonly used mortality tables.
•Expenses
Assessment of directly attributable cash flows
The Company applies judgement in assessing whether cash flows are directly attributable to a specific portfolio of insurance contracts. Insurance acquisition cash flows are included in the measurement of a group of insurance contracts only if they are directly attributable to either the individual contracts in a group, or to the group itself, or the portfolio of insurance contracts to which the group belongs. The Company also considers as attributable cash flows fixed and variable overheads directly attributable to the fulfilment of insurance contracts.
Expense basis for cashflow projections
The Company performs a detailed expense investigation, at least on an annual basis, to determine the expense assumptions used in the cashflow projections. The expense basis is set in accordance with the budgeted attributable expenses and the projected volumes of business. The Company also determines an assumption for the future expense inflation.
•Lapse and surrender rates
Lapse and surrenders assumptions relate to the rate by which policyholders cancel/surrender their policies. The assumptions are set in line with recent Company experience, by adjusting for expected improvements/deteriorations where necessary. The rates vary by product and duration in force.
Discount rates
Life insurance contract liabilities are calculated by discounting expected future cash flows. The Company uses the bottom-up approach in determining the discount rates and hence uses a risk-free rate, plus an illiquidity premium. Risk free rates are determined by reference to the European Insurance and Occupational Pensions Authority (EIOPA) yields and the illiquidity premium is determined by the volatility adjustment as published by EIOPA.
Notes to the financial statements (continued)
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1.Critical accounting estimates and judgements (continued)
(a)Insurance contracts (continued)
Discount rates (continued)
The discount rates that were used to discount the estimates of future cash flows of the life insurance contracts issued and reinsurance contracts held are based on the EUR risk-free rate with volatility adjustment, as these are published by EIOPA. EIOPA annual spot rates are presented in the below table:

1 year | 3 years | 5 years | 10 years | 20 years
2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023
3.366% | 3.557% | 3.393% | 2.639% | 3.321% | 2.523% | 3.282% | 2.593% | 2.955% | 2.606%

Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is determined to reflect the compensation that the Company requires for bearing non-financial risk and its degree of risk aversion. The risk adjustment is determined using a confidence level technique and specifically a Risk-based capital approach with its target confidence level set at 80 percent, over a one year period, which represents the Company’s degree of risk aversion.
CSM amortisation
The CSM of a group of contracts is recognised in profit or loss to reflect services provided in each year, by identifying the coverage units in the group, allocating the CSM remaining at the end of the year (before any allocation) equally to each coverage unit provided in the year and expected to be provided in future years, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the year. The number of coverage units is the quantity of services provided by the contracts in the Company, determined by considering for each contract the quantity of the benefits provided and its expected coverage period. The coverage units will be reviewed and updated at each reporting date. The Company determined the coverage units for its insurance contracts and investment contracts with DPF on the basis of their quantity of benefits (sum insured), including any investment components, and the respective expected durations of each contract.
For reinsurance contracts held, the CSM amortisation reflects the level of service received and depends on the number of underlying contracts in-force.
(b)Fair valuation of investment property
The determination of the fair value of investment property at the year-end requires the use of significant management estimates. Details of key assumptions are disclosed in Note 13 to the financial statements.
2.Management of insurance and financial risk
The Group issues contracts that transfer insurance risk or financial risk or both. This section summarises these risks and the way the Group manages them.
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 random and therefore unpredictable.
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 exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical techniques.
Notes to the financial statements (continued)
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2.Management of insurance and financial risk (continued)
Insurance risk (continued)
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 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.
(a)Frequency and severity of claims
For contracts where death is the insured risk, the most significant factors that could increase the overall frequency of claims are epidemics or widespread 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. Investment contracts with DPF (“Discretionary participation feature”) carry negligible insurance risk.
The Group manages these risks through its underwriting strategy and reinsurance agreements. The underwriting strategy is intended to ensure that the risks underwritten are well diversified in terms of type of risk and the level of insured benefits. Medical selection is also included in the Group’s underwriting procedures with premiums varied to reflect the health condition and lifestyle of the applicants.
The Group has retention limits on any single life assured for term business or risk premium business. The Group reinsures the excess of the insured benefits over approved retention limits under a treaty reinsurance arrangement. Short term insurance contracts are also protected through a combination of selective quota share and surplus reinsurance. Further, the Group has a “CAT XL” reinsurance arrangement to cover its exposure in the case of an event affecting more than three lives.
In general, all large sums assured are facultatively reinsured on terms that substantially limit the Group’s maximum net exposure. The Directors consider that all other business is adequately protected through treaty reinsurance with a reasonable spread of benefits payable according to the age of the insured, and the size of the sum assured. The Group is largely exposed to insurance risk in one geographical area, Malta. Single event exposure is capped through the “CAT XL” reinsurance arrangement as referred above.
(b)Lapse and surrender rates
Lapses relate to the termination of policies due to non–payment of premiums. Surrenders relate to the voluntary termination of policies by policyholders. Policy termination assumptions are determined using statistical measures based on the Group’s experience and vary by product type, policy duration and sales trends.
An increase in lapse rates early in the life of the policy would tend to reduce profits for shareholders, but later increases are broadly neutral in effect.
Notes to the financial statements (continued)
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2.Management of insurance and financial risk (continued)
Insurance risk (continued)
(c)Policy maintenance expenses
Operating expenses assumptions reflect the projected costs of maintaining and servicing in–force policies and associated overhead expenses. The current level of expenses is taken as an appropriate expense base, adjusted for expected expense inflation if appropriate.
An increase in the level of expenses would result in an increase in expenditure, thereby reducing profits for the shareholders.
(d)Discount rates and investment return
Life insurance liabilities are determined as the sum of the discounted value of the expected benefits and future administration expenses directly related to the contract, less the discounted value of the expected theoretical premiums that would be required to meet these future cash outflows. Discount rates are based on current industry risk rates as these are published by EIOPA.
Consistent rates are used also as investment return assumptions to ensure a risk neutral valuation basis.
A change in interest rates will impact the value of the insurance liability and therefore affect the profits for the shareholders.
(e)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.
Notes to the financial statements (continued)
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2.Management of insurance and financial risk (continued)
Insurance risk (continued)
(e)Sources of uncertainty in the estimation of future benefit payments and premium receipts (continued)
Sensitivity analysis
Life business
The table below analyses how the CSM, profit or loss and equity would have increased (decreased) if changes in underwriting risk variables that were reasonably possible at the reporting date had occurred. This analysis presents the sensitivities both gross and net of reinsurance held and is based on a change in one risk variable with all other variables held constant. Sensitivity analysis assumes that changes to variables can be made independently, which is very unlikely to occur in practice.

Key assumption | Change in assumption | Impact on CSM€ | Impact on profit€ | Impact on equity€
Year ended 2023 |  |  |  |
Insurance contract liabilities |  |  |  |
Mortality rates | +10% | (1,855,572) | (207,564) | (134,917)
Mortality rates | -10% | 2,018,567 | 57,019 | 37,062
Expenses | +10% | (925,504) | (353,064) | (229,492)
Expenses | -10% | 1,252,679 | 25,889 | 16,828
Lapse rates | +10% | (688,726) | (76,775) | (49,904)
Lapse rates | -10% | 862,726 | 19,965 | 12,977
Reinsurance contract assets |  |  |  |
Mortality rates | +10% | 1,429,444 | 74,856 | 48,656
Mortality rates | -10% | (1,436,332) | (75,136) | (48,838)
Lapse rates | +10% | (305,859) | (13,647) | (8,871)
Lapse rates | -10% | 363,722 | 15,796 | 10,268

Financial risk
The Group is exposed to financial risk through its financial assets and liabilities, reinsurance assets, and insurance liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance and investment contracts with DPF. The most important components of financial risk are market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
These risks partly arise from open positions in interest rate, currency, debt and equity products, all of which are exposed to general and specific market movements. The Group manages these positions through adherence to an investment policy. The policy adopted is modelled to take into account actuarial recommendations and is developed to achieve long term investment returns in excess of its obligations under insurance and investment contracts with DPF. The principal technique underlying the Group’s framework is to broadly match assets to the liabilities arising from insurance and investment contracts with DPF by reference to the type of benefits payable to contract holders, and the recommended portfolio mix as advised by the approved actuary.
Notes to the financial statements (continued)
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2.Management of insurance and financial risk (continued)
Financial risk (continued)
The Group’s investment policy is formally approved by the Board of Directors. Portfolio review processes and investment decisions are generally delegated to a dedicated Sub-Investment Committee or the Chief Executive Officer. Transactions in excess of pre-established parameters are subject to Board approval. The procedures consider, inter alia, a recommended portfolio structure, authorisation parameters, asset and counterparty limits and currency restrictions. Management reports to the Investment Committee on a regular basis. The Committee meets regularly to consider, inter alia, investment prospects, liquidity, the performance of the portfolio and the overall framework of the Group’s investment strategy. Solvency considerations as regulated by the relevant Authority are also taken into account as appropriate.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument, insurance contract issued or reinsurance contract held will fluctuate because of changes in market prices.
Market risk comprises three types of risk:
(a)Foreign exchange rates currency risk;
(b)Market interest rates risk; and
(c)Market prices risk.
(a)Foreign exchange rates currency risk
The Company's and Group’s exposure to foreign exchange risk arises primarily from investments that are denominated in currencies other than the Euro. As at 31 December 2023, the Company’s and Group’s exposure to foreign currency investments (principally comprising a mix of US Dollar and UK pound) represented 4.4% (2022: 5.4%) of the Group’s total investments excluding the term deposits.
7.6% (2022: 5.1%) of the Group’s cash and cash equivalents and term deposits, at 31 December 2023, are denominated in foreign currency (principally comprising a mix of US Dollar and UK pound). The Group’s corresponding proportion of cash and cash equivalents and term deposits which are denominated in foreign currency is 5.4% (2022: 5.2%).
The risk arising from foreign currency transactions is managed by regular monitoring of the relevant exchange rates and management’s reaction to material movements thereto.
For financial instruments held or issued, a sensitivity analysis technique that measures the change in the fair value and the cash flows of the Group’s financial instruments at the reporting date for hypothetical changes in exchange rates has been used. The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain market conditions. Actual results in the future may differ materially from those projected results due to the inherent uncertainty of global financial markets. The sensitivity analysis is for illustrative purposes only, as in practice market rates rarely change in isolation and are likely to be interdependent.
Should exchange rates at the end of the reporting period differ by +/-10% (2022: +/-10%), with all other variables held constant, the impact on the Company’s and the Group’s pre-tax profit would be +/- €455,742 (2022: +/- €498,329).
(b)Market interest rates risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument or insurance contract or reinsurance contract will fluctuate because of changes in market interest rates.
Notes to the financial statements (continued)
94
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Market risk (continued)
(c)Price risk
The Group is exposed to market price risk arising from the uncertainty about the future prices of investments held that are classified in the statement of financial position as at fair value through profit or loss and as available-for-sale. This risk is mitigated through the adherence to an investment policy geared towards diversification as described earlier.
The total assets subject to equity price risk are the following:

| Consolidated and separate |
| 2023 | 2022
| € | €
Other investments (Note 16) | 25,811,413 | 20,297,067

The sensitivity analysis for price risk illustrates how changes in the fair value of equity securities will fluctuate because of changes in market prices, whether these changes are caused by factors specific to the individual equity issuer, or factors affecting all similar equity securities traded in the market. The Group is principally exposed to price risk in respect of equity investments. Approximately 29% (2022: 27%) of equity securities held at fair value through profit or loss in Note 16 relate to holdings in five local banks. The remaining equity securities held at fair value through profit or loss are mainly held in equities in the Telecommunication Services, Property and Information Technology sectors.
The sensitivity analysis measures the change in the fair value of the instruments for a hypothetical change of 10% in the market price. The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain market conditions. Actual results in the future may differ materially from those projected results due to the inherent uncertainty of global financial markets. Should market prices at the end of the reporting period increase/decrease by 10%, with all other variables held constant, the impact on the Group’s pre-tax profit would be +/- €2,702,863 (2022: +/- €2,551,826). This sensitivity analysis is based on a change in an assumption while holding all other assumptions constant and does not consider, for example, the mitigating impact of the DPF element on policyholder liabilities for contracts with a DPF.

|  |  |  |  | 2023 |  |  |  | 2022
| Change | I | Impact on profit before tax |  | Impact on equity |  | Impact on profit before tax |  | Impact on equity
|  |  | € |  | € |  | € |  | €
Insurance contract liabilities | +10% | - | 12,279,049 | - | 40,581,592 | - | 5,830,919 | - | 37,967,816
Insurance contract liabilities | -10% | - | (8,753,609) | - | 19,548,934 | - | (13,606,837) | - | 18,530,060

Notes to the financial statements (continued)
95
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk
The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Financial assets that potentially subject the Group to concentrations of credit risk consist principally of:
-other investments;
-reinsurers’ contract assets;
-amounts due from insurance policy holders and intermediaries associated with future premium inflows from insurance contracts issued;
-cash and cash equivalents; and
-amounts due from group undertakings.
The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or group of counterparties. Limits on the level of credit risk by category are defined within the Group’s investment policy as described earlier. This policy also considers regulatory restrictions on asset and counterparty exposures. Further detail on the content of the Group’s investment portfolio is provided in Note 15 to these financial statements.
The Group is exposed to credit risk in respect of receivables from group undertakings. Management assesses the respective group undertaking’s ability to repay balances due to the Group periodically and makes provisions for balances which it believes may not be recoverable.
Credit risk in respect of other receivables is not deemed to be significant after considering the range of underlying receivables, and their creditworthiness. Receivables are stated net of impairment. Further detail in this regard is provided in Note 17 to the financial statements.
Reinsurance is used to manage insurance risk. This does not, however, discharge the Company’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Company remains liable for payment to the policyholder. The creditworthiness of reinsurers is considered on an ongoing basis and by reviewing their financial strength prior to finalisation of any contract. The Company’s reinsurer retained its Standard & Poor’s rating of AAA to AA+ bracket as at 31 December 2023.
The following table illustrates the assets that expose the Group to credit risk as at the end of the reporting period and includes the Standard & Poor’s, Moody’s and ARC composite rating for debt securities at fair value through profit or loss, when available, and the default rating for deposits with banks and cash and cash equivalents, when available.
Notes to the financial statements (continued)
96
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk (continued)
Assets bearing credit risk at the end of the reporting period are analysed as follows:

|  |  | Consolidated |  |
|  |  | As at 31 December 2023 |  |
| AAA to AA | A | BBB to B | Below B to unrated | Total
| € | € | € | € | €
Investments |  |  |  |  |
Debt securities at fair value through profit or loss | 2,041,746 | -5,110,614 | -6,113,307 | -4,153,954 | -17,419,621
| 2,041,746 | -5,110,614 | -6,113,307 | -4,153,954 | -17,419,621
Loans and receivables |  |  |  |  |
Loans secured on policies | - | -- | -- | -8,451 | -8,451
Other loans and receivables | - | -3,125,720 | -- | -- | -3,125,720
Trade and other receivables | - | -- | -- | -876,553 | -876,553
Amounts due from group undertakings | - | -- | -- | -12,248,744 | -12,248,744
Term Deposits | - | -- | -- | -- | --
Cash and cash equivalents | - | -266,082 | -4,655,220 | -- | -4,921,302
|  | 3,391,802 | 4,655,220 | 13,133,748 | 21,180,770
Reinsurance Contract Assets | 2,565,601 | -- | -- | -- | -2,565,601
Total assets bearing credit risk | 4,607,347 | -8,502,416 | -10,768,527 | -17,287,702 | -41,165,992

Notes to the financial statements (continued)
97
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk (continued)
Consolidated
As at 31 December 2022
AAA to AA
A
BBB to B
Below B to unrated
Total
€
€
€
€
€
Investments
Debt securities at fair value through profit or loss
1,784,640
6,100,953
9,162,373
4,614,829
21,662,795
1,784,640
6,100,953
9,162,373
4,614,829
21,662,795
Loans and receivables
Loans secured on policies
-
-
-
25,530
25,530
Other loans and receivables
-
3,087,047
-
-
3,087,047
Trade and other receivables
-
-
-
403,114
403,114
Amounts due from group undertakings
-
-
-
-
12,084,836
12,084,836
Term Deposits
-
-
-
1,500,000
1,500,000
Cash and cash equivalents
-
472,104
5,490,190
-
5,962,294
3,559,151
5,490,190
14,013,479
23,062,821
Reinsurance Contract Assets
2,610,911
-
-
-
2,610,911
Total assets bearing credit risk
4,395,551
9,660,104
14,652,563
18,628,309
47,336,527
Notes to the financial statements (continued)
98
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk (continued)
Holding company
As at 31 December 2023
AAA to AA
A
BBB to B
Below B to unrated
Total
€
€
€
€
€
Investments
Debt securities at fair value through profit or loss
2,041,746
-
5,110,614
-
6,113,307
-
4,153,954
-
17,419,621
2,041,746
-
5,110,614
-
6,113,307
-
4,153,954
-
17,419,621
Loans and receivables
Loans secured on policies
-
-
-
8,451
8,451
Other loans and receivables
-
3,125,720
-
-
3,125,720
Trade and other receivables
-
-
-
783,004
783,004
Amounts due from group undertakings
-
-
-
12,064,427
12,064,427
Term Deposits
-
-
-
-
-
Cash and cash equivalents
-
266,082
3,230,997
-
3,497,079
-
3,391,802
3,230,997
12,855,882
19,478,681
Reinsurance Contract Assets
2,565,601
-
-
-
2,565,601
Total assets bearing credit risk
4,607,347
8,502,416
9,344,304
17,009,836
39,463,903
Notes to the financial statements (continued)
99
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Credit risk (continued)
Holding company
As at 31 December 2022
AAA to AA
A
BBB to B
Below B to unrated
Total
€
€
€
€
€
Investments
Debt securities at fair value through profit or loss
1,784,640
6,100,953
9,162,373
4,614,829
21,662,795
1,784,640
6,100,953
9,162,373
4,614,829
21,662,795
Loans and receivables
Loans secured on policies
-
-
-
25,529
25,529
Other loans and receivables
-
3,087,047
-
-
3,087,047
Trade and other receivables
-
-
-
328,280
328,280
Amounts due from group undertakings
-
-
-
11,900,519
11,900,519
Term Deposits
-
-
-
1,500,000
1,500,000
Cash and cash equivalents
-
472,104
4,379,031
-
4,851,135
-
3,559,151
4,379,031
13,754,328
21,692,510
Reinsurance Contract Assets
2,610,911
-
-
-
2,610,911
Total assets bearing credit risk
4,395,551
9,660,104
13,541,404
18,369,157
45,966,216
Unrated financial assets principally comprise locally traded corporate bonds on the Malta Stock Exchange, amounts due from group companies, trade and other receivables, loans secured on policies and certain deposits with local bank institutions for which no international rating is available.
As at 31 December 2023 and 2022 the Group had an exposure with the Government of Malta through investments in debt securities. In 2023 these were equivalent to 8.2% (2022: 7.0%) of the Group’s total investments.
Notes to the financial statements (continued)
100
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Liquidity risk
Liquidity is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Group adopts a prudent liquidity risk management approach by maintaining a sufficient proportion of its assets in cash and marketable securities through the ability to close out market positions. Senior management is updated on a regular basis on the cash position of the Group illustrating, inter alia, actual cash balance net of operational commitments falling due in the short term as well as investment commitments falling due in the medium and long term.
The Group is exposed to daily calls on its available cash resources in order to meet its obligations, including claims arising from contracts in issue by the Company. Other financial liabilities which expose the Group to liquidity risk mainly comprise trade and other payables. Liquidity is the risk that cash may not be available to pay obligations when due at a reasonable cost.
Maturity analysis for insurance liabilities
The following table summarizes the maturity profile of the Company’s portfolios of insurance contracts issued that are liabilities based on the remaining contractual undiscounted net cash flows expected to be paid out in the periods presented. Liabilities for remaining coverage measured under the PAA have been excluded from this analysis.
2023
Undiscounted net future cash flows
1 year or less
1-2 years
2-3 years
3-4 years
4-5 years
More than 5 years
Total
€
€
€
€
€
€
€
Insurance contracts
Participating
10,292,881
9,850,245
9,850,772
8,919,157
5,557,667
21,758,592
66,229,314
Other life
(1,540,962)
(1,298,711)
(1,116,032)
(947,495)
(814,732)
(1,463,765)
(7,181,697)
Sickness and Accident
124,767
(248,254)
(216,888)
(174,942)
(126,996)
(193,898)
(836,211)
Savings
(3,742,365)
(2,999,105)
(1,888,241)
(905,729)
(257,190)
70,747,257
60,954,627
Total
5,134,321
5,304,175
6,629,611
6,890,991
4,358,749
90,848,186
119,166,033
Life Reinsurance Contracts
(611,495)
(250,550)
(256,558)
(257,117)
(254,319)
(3,722,186)
(5,352,225)
Total
4,522,826
5,053,625
6,373,053
6,633,874
4,104,430
87,126,000
113,813,808
Notes to the financial statements (continued)
101
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Liquidity risk (continued)
Maturity analysis for insurance liabilities (continued)
2022
Undiscounted net future cash flows
1 year or less
1-2 years
2-3 years
3-4 years
4-5 years
More than 5 years
Total
€
€
€
€
€
€
€
Insurance contracts
Participating
8,922,728
8,580,575
10,010,543
9,927,413
8,371,129
28,863,973
74,676,361
Other life
(1,031,257)
(962,185)
(803,482)
(647,570)
(507,179)
1,124,456
(2,827,217)
Sickness and Accident
77,072
(233,944)
(208,084)
(181,058)
(143,354)
(209,803)
(899,171)
Savings
(3,944,179)
(3,415,383)
(2,375,545)
(1,432,735)
(605,728)
52,850,850
41,077,280
Total
4,024,364
3,969,063
6,623,432
7,666,050
7,114,868
82,629,476
112,027,253
Life Reinsurance Contracts
(1,357,287)
(419,212)
(415,828)
(404,572)
(389,750)
(4,826,782)
(7,813,431)
Total
2,667,077
3,549,851
6,207,604
7,261,478
6,725,118
77,802,694
104,213,822
The amounts of insurance contract liabilities that are repayable on demand are set out below.

2023 | Amount payable on demand | Carrying amount
| € | €
Participating | 55,781,232 | 65,206,318
Savings | 41,543,444 | 35,348,323
Total | 97,324,676 | 100,554,641

2022 | Amount payable on demand | Carrying amount
| € | €
Participating | 61,138,380 | 71,988,460
Savings | 26,834,746 | 21,411,637
Total | 87,973,126 | 93,400,097

Notes to the financial statements (continued)
102
LifeStar Insurance p.l.c. – Annual Financial Report 2023
2.Management of insurance and financial risk (continued)
Liquidity risk (continued)
Maturity analysis for financial assets
The following table summarises the maturity profile of financial assets of the Company based on remaining undiscounted contractual cash flows.
The tables below analyses the Group’s financial assets and reinsurance contract assets into relevant maturity groupings based on the remaining period between the end of the reporting period and the maturity date. The expected cash outflows for insurance and investment contracts do not consider the impact of early surrenders.

|  |  | Consolidated and separate |  |  |
|  |  | Expected undiscounted cash inflows |  |  |
| Less than one year | Between one and five years | Between five and ten years | Between 10 and 20 years | Over 20 years | Total
| € | € | € | € | € | €
Assets | 271,400 | 9,769,145 | 6,622,784 | 756,291 | - | 17,419,620

Regulatory compliance risk
The risk of non-compliance with legal and regulatory requirements as well as supervisory expectations which may result in administrative or disciplinary sanctions, or of material financial loss, due to failure to comply with the provisions governing the Company’s activities. By ensuring that these rules are observed, the Company works to protect its customers, shareholders, counterparties and employees. This is conducted in alignment with the Company’s strategy as operating a business model based on prudence, sound governance and integrity.
Notes to the financial statements (continued)
103
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business
3.1 Insurance revenue
The following table present an analysis of the insurance revenue recognised in the period.

| 2023 | 2022
| € | €
Contracts not measured under the PAA |  |
Amounts relating to changes in liabilities for remaining coverage |  |
-Expected incurred claims and other insurance service expenses | 4,338,796 | 4,397,018
-Change in risk adjustment for non-financial risk for risk expired | 147,890 | 174,353
-CSM recognised for services provided | 518,429 | 425,102
Recovery of insurance acquisition cash flows | 146,582 | 52,918
Contracts measured under the PAA | 487,244 | 451,764
Total insurance revenue | 5,638,941 | 5,501,155

3.2 Insurance service expenses
The table below show an analysis of insurance service expenses recognised in the period.

| 2023 | 2022
| € | €
Incurred claims and other insurance service expenses | 2,343,999 | 1,803,400
Changes that relate to future service: losses on onerous contracts and reversals of those losses | 323,474 | 728,229
Changes that relate to past service: changes to liabilities for incurred claims | (948,013) | 243,272
Amortisation of insurance acquisition cash flows | 184,484 | 77,690
Total insurance service expenses | 1,903,944 | 2,852,591

Notes to the financial statements (continued)
104
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.3 Net expense from reinsurance contracts held
An analysis of allocation of reinsurance premiums paid and amounts recovered from reinsurers are presented in the tables below.

| 2023 | 2022
| € | €
Amounts related to liabilities for remaining coverage |  |
-Recoveries for expected incurred claims and other expenses | (2,237,304) | (1,685,374)
-Risk adjustment for the risk expired | 77,677 | (70,995)
-CSM for the service received | 118,513 | 11,687
Contracts not measured under the PAA | (2,041,114) | (1,744,682)
Contracts measured under the PAA | (243,467) | (196,514)
Allocation of reinsurance premiums | (2,284,581) | (1,941,196)
Recoveries for incurred claims and other expenses | 1,085,015 | 1,071,102
Changes that relate to future service: recoveries for losses on onerous contracts and reversals of those losses | (169,308) | 155,498
Changes that relate to past service: changes to recoveries of liabilities for incurred claims | (29,867) | (501,700)
Effect of changes in non-performance risk of reinsurers | - | -
Amounts recovered from reinsurers | 885,840 | 724,900
Net income or expenses from reinsurance contracts held | (1,398,741) | (1,216,296)

Notes to the financial statements (continued)
105
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.4 Investment income and net insurance financial result
The tables below present analysis of net investment income and net insurance finance income/(expenses) recognised in profit and loss and OCI in the period:

| 2023 | 2022
| € | €
Insurance finance income/(expenses) from insurance contracts issued |  |
Interest accreted and effect of changes in interest rates and other financial assumptions | 399,365 | (74,589)
Changes in fair value of underlying assets measured under VFA | 7,567,691 | (7,931,908)
Total insurance finance income/(expenses) from insurance contracts issued recognised in P&L | 7,967,056 | (8,006,497)
Finance income/(expenses) from reinsurance contracts held |  |
Interest accreted and effect of changes in interest rates and other financial assumptions | 787,355 | 1,535,724
Total finance income/(expenses) from reinsurance contracts held recognised in P&L | 787,355 | 1,535,724
Net insurance finance income or expenses | 8,754,411 | (6,470,773)

3.5 Insurance and reinsurance contracts
The table below sets out the carrying amounts of groups of insurance and reinsurance contracts assets and liabilities at the end of reporting date.

|  |  | 2023 |  |  | 2022
| Assets | Liabilities | Net | Assets | Liabilities | Net
| € | € | € | € | € | €
Total insurance contracts issued | 945,785 | (106,109,076) | (105,163,291) | 1,619,812 | (98,808,592) | (97,188,780)
Total reinsurance contracts held | 2,813,625 | (248,024) | 2,565,601 | 2,745,654 | (134,743) | 2,610,911

Notes to the financial statements (continued)
106
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.1 Reconciliation of changes in insurance contracts by remaining coverage and incurred claims
The tables below represent the reconciliation from the opening to the closing balances of the liabilities for the remaining coverage and the liabilities for incurred claims for insurance contracts
2023
Liabilities for remaining coverage
Liabilities for incurred claims
Total
Excluding loss component
Loss component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Opening assets
(1,737,013)
532,537
(415,336)
-
-
(1,619,812)
Opening liabilities
96,462,590
186,039
2,080,598
79,365
-
98,808,592
Net opening balance
94,725,577
718,576
1,665,262
79,365
-
97,188,780
Changes in the statement of comprehensive income
Contracts under fair value approach
(5,151,696)
-
-
-
-
(5,151,696)
Other contracts
(487,244)
-
-
-
-
(487,244)
Insurance revenue
(5,638,940)
-
-
-
-
(5,638,940)
Notes to the financial statements (continued)
107
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.1 Reconciliation of changes in insurance contracts by remaining coverage and incurred claims (continued)

2023 | Liabilities for remaining coverage | Liabilities for incurred claims | Total
Excluding loss component | Loss component | Contracts not under PAA | Contracts under PAA
Estimates of present value of future cash flows | Risk adjustment for non-financial risk
| € | € | € | € | € | €
Incurred claims and other insurance service expenses | - | (24,699) | 2,292,118 | 76,580 | - | 2,343,999
Acquisition expenses | 184,484 | - | - | - | - | 184,484
Losses and reversal of losses on onerous contracts | - | 323,475 | - | - | - | 323,475
Adjustments to liabilities for incurred claims | - | - | (948,013) | - | - | (948,013)
Insurance service expenses | 184,484 | 298,776 | 1,344,105 | 76,580 | - | 1,903,945
Investment components | (13,555,619) | - | 13,555,619 | - | - | -
Insurance service results | (19,010,075) | 298,776 | 14,899,724 | 76,580 | - | (3,734,995)
Insurance finance income / expense | 7,965,147 | 1,912 | - | - | - | 7,967,059
Total changes in the statement of comprehensive income | (11,044,928) | 300,688 | 14,899,724 | 76,580 | - | 4,232,064

Notes to the financial statements (continued)
108
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.1 Reconciliation of changes in insurance contracts by remaining coverage and incurred claims (continued)
2023
Liabilities for remaining coverage
Liabilities for incurred claims
Total
Excluding loss component
Loss component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Cash flows
Premium received
21,446,339
-
-
-
-
21,446,339
Claims and other insurance service expenses paid, including investment components
-
-
(14,640,363)
(77,972)
-
(14,718,335)
Insurance acquisition cash flows
(2,985,554)
-
-
-
-
(2,985,554)
Total cash flows
18,460,785
-
(14,640,363)
(77,972)
-
3,742,450
Net closing balance
102,141,433
1,019,265
1,924,623
77,972
-
105,163,293
Closing assets
(1,231,272)
(18,713)
304,200
-
-
(945,785)
Closing liabilities
103,372,705
1,037,978
1,620,423
77,972
-
106,109,078
Net closing balance
102,141,433
1,019,265
1,924,623
77,972
-
105,163,293
Notes to the financial statements (continued)
109
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.1 Reconciliation of changes in insurance contracts by remaining coverage and incurred claims (continued)
2022
Liabilities for remaining coverage
Liabilities for incurred claims
Total
Excluding loss component
Loss component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Opening assets
1,325,872
-
(401,655)
-
-
924,217
Opening liabilities
(103,611,788)
-
(999,163)
-
-
(104,610,951)
Net opening balance
(102,285,916)
-
(1,400,818)
-
-
(103,686,734)
Changes in the statement of comprehensive income
Contracts under fair value approach
5,049,390
-
-
-
-
5,049,390
Other contracts
451,764
-
-
-
-
451,764
Insurance revenue
5,501,154
-
-
-
-
5,501,154
Notes to the financial statements (continued)
110
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.1 Reconciliation of changes in insurance contracts by remaining coverage and incurred claims (continued)
2022
Liabilities for remaining coverage
Liabilities for incurred claims
Total
Excluding loss component
Loss component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Incurred claims and other insurance service expenses
-
8,928
(1,653,326)
(159,003)
-
(1,803,401)
Acquisition expenses
(77,690)
-
-
-
-
(77,690)
Losses and reversal of losses on onerous contracts
-
(728,228)
-
-
-
(728,228)
Adjustments to liabilities for incurred claims
-
-
(243,272)
-
-
(243,272)
Insurance service expenses
(77,690)
(719,300)
(1,896,598)
(159,003)
-
(2,852,591)
Investment components
13,480,972
-
(13,480,972)
-
-
-
Insurance service results
18,904,436
(719,300)
(15,377,570)
(159,003)
-
2,648,564
Insurance finance income / expense
8,005,773
724
-
-
-
8,006,497
Total changes in the statement of comprehensive income
26,910,209
(718,576)
(15,377,570)
(159,003)
-
10,655,061
Notes to the financial statements (continued)
111
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.1 Reconciliation of changes in insurance contracts by remaining coverage and incurred claims (continued)

2022 | Liabilities for remaining coverage | Liabilities for incurred claims | Total
Excluding loss component | Loss component | Contracts not under PAA | Contracts under PAA
Estimates of present value of future cash flows | Risk adjustment for non-financial risk
| € | € | € | € | € | €
Cash flows |  |  |  |  |  |
Premium received | (21,953,118) | - | - | - | - | (21,953,118)
Claims and other insurance service expenses paid, including investment components | - | - | 15,113,127 | 79,638 | - | 15,192,765
Insurance acquisition cash flows | 2,603,242 | - | - | - | - | 2,603,242
Total cash flows | (19,349,876) | - | 15,113,127 | 79,638 | - | (4,157,111)
Net closing balance | (94,725,577) | (718,576) | (1,665,261) | (79,365) | - | (97,188,780)
Closing assets | 1,737,013 | (532,537) | 415,336 | - | - | 1,619,812
Closing liabilities | (96,462,590) | (186,039) | (2,080,598) | (79,365) | - | (98,808,592)
Net closing balance | (94,725,577) | (718,576) | (1,665,261) | (79,365) | - | (97,188,780)

Notes to the financial statements (continued)
112
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.2 Reconciliation of measurement components of insurance contracts not measured under the PAA
The tables below represent the reconciliation from the opening to the closing balances for each measurement component of insurance contracts (other than those measured under the PAA).

2023 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Opening assets | (2,322,410) | 125,914 | 576,684 | (1,619,812)
Opening liabilities | 80,938,269 | 1,734,093 | 15,711,026 | 98,383,389
Net opening balance | 78,615,860 | 1,860,008 | 16,287,710 | 96,763,577
Changes in the statement of comprehensive income |  |  |  |
Changes that relate to current services |  |  |  |
CSM recognised for services provided | - | - | (518,429) | (518,429)
Risk adjustment recognised for the risk expired | - | (147,890) | - | (147,890)
Experience adjustments - expected | (2,071,377) | - | - | (2,071,377)
Experience adjustments - actual | - | - | - | -

Notes to the financial statements (continued)
113
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.2 Reconciliation of measurement components of insurance contracts not measured under the PAA (continued)

2023 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Changes that relate to future services |  |  |  |
Contracts initially recognised in the period | 3,005,586 | (271,784) | (2,733,803) | -
Changes in estimates that adjust the CSM | 236,500 | (14,735) | - | 221,764
Changes in estimates that result in losses and reversal of losses on onerous contracts | (3,102,302) | 356,845 | 2,847,169 | 101,711
Changes that relate to past services |  |  |  |
Adjustments to liabilities for incurred claims | (948,013) | - | - | (948,013)
Insurance service result | (2,879,606) | (77,564) | (405,062) | (3,362,232)
Insurance finance expenses | 7,943,967 |  | 23,092 | 7,967,059
Total changes in the statement of comprehensive income | 5,064,361 | (77,564) | (381,971) | 4,604,826
Cash flows | 3,456,759 | - | - | 3,456,759
Net closing balance | 87,136,979 | 1,782,444 | 15,905,739 | 104,825,162
Closing assets | (3,186,466) | 337,280 | 1,903,401 | (945,785)
Closing liabilities | 90,323,446 | 1,445,164 | 14,002,338 | 105,770,947
Net closing balance | 87,136,979 | 1,782,444 | 15,905,739 | 104,825,162

Notes to the financial statements (continued)
114
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.2 Reconciliation of measurement components of insurance contracts not measured under the PAA (continued)

2022 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Opening assets | 4,232,937 | (917,456) | (2,391,259) | 924,222
Opening liabilities | (94,041,288) | (1,456,254) | (8,931,384) | (104,428,927)
Net opening balance | (89,808,351) | (2,373,710) | (11,322,643) | (103,504,705)
Changes in the statement of comprehensive income |  |  |  |
Changes that relate to current services |  |  |  |
CSM recognised for services provided | - | - | 425,102 | 425,102
Risk adjustment recognised for the risk expired |  | 174,353 | - | 174,353
Experience adjustments - expected | 4,397,018 | - | - | 4,397,018
Experience adjustments - actual | (1,644,397) | - | - | (1,644,397)

Notes to the financial statements (continued)
115
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.2 Reconciliation of measurement components of insurance contracts not measured under the PAA (continued)

2022 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Changes that relate to future services |  |  |  |
Contracts initially recognised in the period | 3,053,705 | (473,166) | (3,359,315) | (778,776)
Changes in estimates that adjust the CSM | 1,250,116 | 798,182 | (2,048,298) | -
Changes in estimates that result in losses and reversal of losses on onerous contracts | 36,214 | 14,334 | - | 50,547
Changes that relate to past services |  |  |  |
Adjustments to liabilities for incurred claims | (243,272) | - | - | (243,272)
Insurance service result | 6,849,383 | 513,702 | (4,982,511) | 2,380,574
Insurance finance expenses | 7,989,052 | - | 17,445 | 8,006,497
Total changes in the statement of comprehensive income | 14,838,435 | 513,702 | (4,965,066) | 10,387,071
Cash flows | (3,645,943) | - | - | (3,645,943)
Net closing balance | (78,615,860) | (1,860,008) | (16,287,710) | (96,763,577)
Closing assets | 2,322,410 | (125,914) | (576,684) | 1,619,812
Closing liabilities | (80,938,269) | (1,734,093) | (15,711,026) | (98,383,389)
Net closing balance | (78,615,860) | (1,860,008) | (16,287,710) | (96,763,577)

Notes to the financial statements (continued)
116
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.3 Reconciliation of changes in reinsurance contracts held by remaining coverage and incurred claims
The tables below represent the reconciliation from the opening to the closing balances of the assets for the remaining coverage and the assets for incurred claims for reinsurance contracts held.
2023
Liabilities for remaining coverage
Amounts recoverable for incurred claims
Total
Remaining coverage component
Loss-recovery component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Opening assets
4,801,421
145,654
(2,248,634)
55,555
-
2,753,997
Opening liabilities
(152,337)
9,250
-
-
-
(143,086)
Net opening balance
4,649,085
154,904
(2,248,634)
55,555
-
2,610,911
Changes in the statement of profit or loss
Allocation of reinsurance premiums
(2,284,583)
-
-
-
-
(2,284,583)
Amounts recovered from reinsurers
-
-
-
-
-
-
Recoveries for incurred claims and other expenses
-
28,141
405,147
651,728
-
1,085,016
Notes to the financial statements (continued)
117
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.3 Reconciliation of changes in reinsurance contracts held by remaining coverage and incurred claims (continued)
2023
Liabilities for remaining coverage
Amounts recoverable for incurred claims
Total
Remaining coverage component
Loss-recovery component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Changes in the statement of profit or loss (continued)
Changes that relate to future service: recoveries for losses on onerous contracts and reversals of those losses
-
(169,308)
-
-
-
(169,308)
Changes that relate to past service: changes to recoveries of liabilities for incurred claims
-
(29,867)
-
-
(29,867)
Net expenses from reinsurance contracts
(2,284,583)
(141,168)
(375,280)
651,728
-
(1,398,743)
Finance income from reinsurance contracts held recognised in P&L
785,792
1,564
-
-
-
787,355
Total changes in the statement of comprehensive income
(1,498,792)
(139,604)
375,280
651,728
-
(611,388)
Notes to the financial statements (continued)
118
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.3 Reconciliation of changes in reinsurance contracts held by remaining coverage and incurred claims (continued)
2023
Liabilities for remaining coverage
Amounts recoverable for incurred claims
Total
Remaining coverage component
Loss-recovery component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Cash flows
Premiums paid
1,520,842
-
-
-
-
1,520,842
Amounts received
-
-
(302,061)
(652,703)
-
(954,764)
Total cash flows
1,520,842
(302,061)
(652,703)
-
566,078
Net closing balance
4,671,135
15,300
(2,175,415)
54,581
-
2,565,601
Closing assets
5,024,231
25,908
(2,291,094)
54,581
-
2,813,625
Closing liabilities
(353,096)
(10,607)
115,679
-
-
(248,024)
Net closing balance
4,671,135
15,300
(2,175,415)
54,581
-
2,565,601
Notes to the financial statements (continued)
119
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.3 Reconciliation of changes in reinsurance contracts held by remaining coverage and incurred claims (continued)
The tables below represent the reconciliation from the opening to the closing balances of the assets for the remaining coverage and the assets for incurred claims for reinsurance contracts held.
2022
Liabilities for remaining coverage
Amounts recoverable for incurred claims
Total
Remaining coverage component
Loss-recovery component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Opening assets
6,126,349
-
(1,765,814)
-
-
4,360,535
Opening liabilities
-
-
-
-
-
Net opening balance
6,126,349
-
(1,765,814)
-
-
4,360,535
Changes in the statement of profit or loss
Allocation of reinsurance premiums
(1,941,196)
-
-
-
-
(1,941,196)
Amounts recovered from reinsurers
-
-
-
-
-
-
Recoveries for incurred claims and other expenses
-
-
959,800
111,302
-
1,071,102
Notes to the financial statements (continued)
120
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.3 Reconciliation of changes in reinsurance contracts held by remaining coverage and incurred claims (continued)
2022
Liabilities for remaining coverage
Amounts recoverable for incurred claims
Total
Remaining coverage component
Loss-recovery component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Changes in the statement of profit or loss (continued)
Changes that relate to future service: recoveries for losses on onerous contracts and reversals of those losses
-
155,498
-
-
-
155,498
Changes that relate to past service: changes to recoveries of liabilities for incurred claims
-
-
(501,700)
-
-
(501,700)
Net expenses from reinsurance contracts
(1,941,196)
155,498
458,100
111,302
-
(1,216,296)
Finance income from reinsurance contracts held recognised in P&L
(1,530,481)
(594)
-
-
-
(1,531,076)
Total changes in the statement of comprehensive income
(3,472,034)
176,015
458,100
111,302
-
(2,726,617)
Notes to the financial statements (continued)
121
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.3 Reconciliation of changes in reinsurance contracts held by remaining coverage and incurred claims (continued)
2022
Liabilities for remaining coverage
Amounts recoverable for incurred claims
Total
Remaining coverage component
Loss-recovery component
Contracts not under PAA
Contracts under PAA
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
€
€
€
€
€
€
Cash flows
Premiums paid
1,994,413
-
-
-
-
1,994,413
Amounts received
-
-
(940,920)
(55,746)
-
(996,666)
Total cash flows
1,994,413
-
(940,920)
(55,746)
-
997,746
Net closing balance
4,648,729
176,015
(2,248,634)
55,555
-
2,631,665
Closing assets
4,801,152
158,334
(2,248,634)
55,555
-
2,766,408
Closing liabilities
(152,424)
17,681
-
-
-
(134,743)
Net closing balance
4,648,729
176,015
(2,248,634)
55,555
-
2,631,665
Notes to the financial statements (continued)
122
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.4 Reconciliation of measurement components of reinsurance contracts held not measured under the PAA
The table below represents the reconciliation from the opening to the closing balance for each measurement component of reinsurance contracts held (other than those measured under the PAA).

2023 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Opening assets | (2,570,437) | (684,300) | 651,529 | (2,603,208)
Opening liabilities | (446,442) | (59,800) | 649,329 | 143,087
Net opening balance | (3,016,879) | (744,100) | 1,300,858 | (2,460,121)
Changes in the statement of comprehensive income |  |  |  |
Changes that relate to current services |  |  |  |
CSM recognised for services received | - | - | 118,513 | 118,513
Change in risk adjustment for non-financial risk expired | - | 77,677 | - | 77,677
Experience adjustments | 1,453,640 | - | - | 1,453,640

Notes to the financial statements (continued)
123
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.4 Reconciliation of measurement components of reinsurance contracts held not measured under the PAA (continued)

2023 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Changes that relate to future services |  |  |  |
Contracts initially recognised in the period | (805,936) | (107,004) | 858,447 | (54,493)
Changes in estimates that adjust the CSM | 2,909,289 | 45,213 | (2,954,502) | -
Changes in the FCF that do not adjust the CSM for the group of underlying insurance contracts | 177,510 | (8,202) | - | 169,308
Changes in recoveries of losses on onerous underlying contracts that adjust the CSM | - | - | 12,490 | 12,490
Changes in estimates that relate to losses and reversals of losses on onerous underlying contracts | - | - | - | -
Changes that relate to past services | 29,867 |  |  | 29,867
Changes in amounts recoverable arising from changes in liability for incurred claims | - | - | - | -
Effect of changes in non-performance risk of reinsurers | - | - | - | -
Net expense from reinsurance contracts | 3,764,370 | 7,684 | (1,965,052) | 1,807,002

Notes to the financial statements (continued)
124
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.4 Reconciliation of measurement components of reinsurance contracts held not measured under the PAA (continued)

2023 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Net finance income from reinsurance contracts | (813,979) | - | 26,624 | (787,355)
Total changes in the statement of comprehensive income | 2,950,392 | 7,684 | (1,938,428) | 1,019,647
Cash flows | (947,817) | - |  | (947,817)
Net closing balance | (1,014,305) | (736,416) | (637,570) | (2,388,291)
Closing assets | 667,310 | (481,208) | (2,822,417) | (2,636,315)
Closing liabilities | (1,681,614) | (255,208) | (2,184,846) | (4,121,668)
Net closing balance | (1,014,304) | (736,416) | (637,571) | (2,388,291)

Notes to the financial statements (continued)
125
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.4 Reconciliation of measurement components of reinsurance contracts held not measured under the PAA (continued)
The table below represents the reconciliation from the opening to the closing balance for each measurement component of reinsurance contracts held (other than those measured under the PAA).

2022 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Opening assets | 4,280,760 | 870,318 | (889,194) | 4,261,884
Opening liabilities | (60,338) | - | 60,338 | -
Net opening balance | 4,220,422 | 870,318 | (828,856) | 4,261,884
Changes in the statement of comprehensive income |  |  |  |
Changes that relate to current services |  |  |  |
CSM recognised for services received | - | - | 11,687 | 11,687
Change in risk adjustment for non-financial risk expired | - | (70,995) | - | (70,995)
Experience adjustments | (730,223) | - | - | (730,223)

Notes to the financial statements (continued)
126
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.4 Reconciliation of measurement components of reinsurance contracts held not measured under the PAA (continued)

2022 | Estimates of present value of future cash flows | Risk adjustment for non-financial risk | Contractual Service Margin | Total
| € | € | € | €
Changes that relate to future services |  |  |  |
Contracts initially recognised in the period | 948,087 | 123,117 | (964,142) | 107,062
Changes in estimates that adjust the CSM | (315,835) | (175,410) | 491,245 | -
Changes in recoveries of losses on onerous underlying contracts that adjust the CSM | - | - | - | -
Changes in estimates that relate to losses and reversals of losses on onerous underlying contracts | 77,126 | (2,930) | - | 74,196
Changes that relate to past services |  |  |  |
Changes in amounts recoverable arising from changes in liability for incurred claims | (501,700) | - | - | (501,700)
Effect of changes in non-performance risk of reinsurers | - | - | - | -
Net expense from reinsurance contracts | (522,545) | (126,218) | (461,210) | (1,109,973)

Notes to the financial statements (continued)
127
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.4 Reconciliation of measurement components of reinsurance contracts held not measured under the PAA (continued)
2022
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Contractual Service Margin
Total
€
€
€
€
Net finance income from reinsurance contracts
(1,541,039)
-
9,964
(1,531,076)
Total changes in the statement of comprehensive income
(2,063,584)
(126,218)
(451,246)
(2,641,049)
Cash flows
860,041
-
-
860,041
Net closing balance
3,016,879
744,100
(1,280,102)
2,480,877
Closing assets
2,570,437
684,300
(639,117)
2,615,619
Closing liabilities
446,442
59,800
(640,985)
(134,743)
Net closing balance
3,016,879
744,100
(1,280,102)
2,480,877
Notes to the financial statements (continued)
128
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5 Insurance and reinsurance contracts (continued)
3.5.5 Effect of contracts initially recognised in the period
Profitable (non-onerous) contracts
2023
2022
€
€
Insurance acquisition cash flows
2,947,652
2,693,941
Claims and other insurance service expenses payable
-
-
Estimates of present value of cash outflows
2,947,652
2,693,941
Estimates of present value of cash inflows
-
-
Risk adjustment for non-financial risk
356,845
473,166
Contractual Service Margin (CSM)
2,847,168
3,359,315
Losses recognised on initial recognition / Amount included in insurance contract liabilities for the period
6,151,665
6,526,422

Reinsurance contracts held | 2023 | 2022
| € | €
Estimates of PV of future cash inflows | - | -
Estimates of PV of future cash outflows | - | -
Risk adjustment | (107,004) | (123,117)
Income recognised on initial recognition | 751,443 | 841,025
CSM | 858,447 | 964,142

Notes to the financial statements (continued)
129
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5.Insurance and reinsurance contracts (continued)
3.5.6 Expected recognition of the contractual service margin
An analysis of the expected recognition of the CSM remaining at the end of reporting period in profit or loss is presented below.
2023
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
5-10 years
>10 years
Total
€
€
€
€
€
€
€
€
Insurance contracts
-Participating
180,292
201,511
217,802
234,238
247,893
1,376,623
4,782,654
7,241,013
-Other Life
255,587
269,572
280,122
287,605
290,899
1,469,454
4,927,284
7,780,523
-Savings
11,462
14,320
16,853
19,128
21,180
123,784
325,133
531,859
-Sickness & Accident
47,840
47,826
47,418
44,448
39,718
125,094
-
352,344
Total CSM for insurance contracts
495,181
533,228
562,195
585,419
599,690
3,094,955
10,035,071
15,905,739
Reinsurance contracts
-Life Reinsurance
(60,696)
(58,823)
(56,736)
(53,812)
(50,267)
(200,180)
(157,057)
(637,571)
Total CSM for reinsurance contracts held
434,484
474,405
505,459
531,607
549,423
2,894,775
9,878,014
15,268,168
Notes to the financial statements (continued)
130
LifeStar Insurance p.l.c. – Annual Financial Report 2023
3.Particulars of business (continued)
3.5.Insurance and reinsurance contracts (continued)
3.5.6 Expected recognition of the contractual service margin (continued)

2022 | Less than 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | 5-10 years | >10 years | Total
| € | € | € | € | € | € | € | €
Insurance contracts |  |  |  |  |  |  |  |
-Participating | 248,975 | 279,680 | 304,007 | 324,384 | 338,236 | 1,911,970 | 7,372,879 | 10,780,131
-Other Life | 108,334 | 114,256 | 118,900 | 122,247 | 124,065 | 630,684 | 2,223,291 | 3,441,778
-Savings | 31,194 | 41,014 | 50,055 | 58,229 | 65,647 | 403,751 | 1,174,219 | 1,824,110
-Sickness & Accident | 34,030 | 34,027 | 34,011 | 33,518 | 30,056 | 76,048 | - | 241,690
Total CSM for insurance contracts | 422,534 | 468,977 | 506,973 | 538,377 | 558,005 | 3,022,454 | 10,770,390 | 16,287,710
Reinsurance contracts |  |  |  |  |  |  |  |
-Life Reinsurance | (68,167) | (66,870) | (65,625) | (64,265) | (61,769) | (276,279) | (677,128) | (1,280,103)
Total CSM for reinsurance contracts held | 354,367 | 402,107 | 441,348 | 474,113 | 496,236 | 2,746,175 | 10,093,262 | 15,007,606

Notes to the financial statements (continued)
131
LifeStar Insurance p.l.c. – Annual Financial Report 2023
4.Investment return and fair value movements
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Investment income
Rental income from investment property
249,393
356,148
249,393
356,148
Dividends received from:
-subsidiaries
-
-
500,000
500,000
-investments at fair value through profit or loss
589,706
693,480
589,706
693,480
-available-for-sale investments
-
3,735
-
3,735
Interest income from investments at fair value through profit or loss
844,406
801,871
844,406
801,871
Impairment loss on available-for-sale equity instruments
-
(377,000)
-
(377,000)
Other investment losses
(69,701)
(157,405)
(69,701)
(157,405)
1,613,804
1,320,829
2,113,804
1,820,829
Movement in fair value
Net fair value gain on investment property and assets held for sale
15,708
(334,403)
15,708
(334,403)
Net fair value gain/ (loss) on investments – bonds
-
-
-
-
Net fair value gain/ (loss) on investments – equity and collective investment schemes
6,282,378
(12,183,964)
6,282,378
(12,183,964)
6,298,086
(12,518,367)
6,298,086
(12,518,367)
Net investment income
7,911,890
(11,197,538)
8,411,890
(10,697,538)
Notes to the financial statements (continued)
132
LifeStar Insurance p.l.c. – Annual Financial Report 2023
5.Commissions and fees receivable
Revenue represents the commissions receivable by LifeStar Health in respect of premia written relating to business generated during the year.
This includes profit commission earned during the year, which is determined on the basis of the estimated performance of business underwritten during the same period. This basis may change significantly once the insurance principal finalises its profit for the underwriting year under review. In view of this, the actual profit commission might be different from the estimated profit commission calculated as at the end of the reporting period.

|  | Consolidated
| 2023 | 2022
| € | €
Commission and fees receivable | 1,794,598 | 1,826,882

6.Interest income from financial assets at amortised cost
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Interest receivable from:
-other loans and receivables
277,499
244,371
277,499
244,371
-related companies
397,766
397,766
397,766
397,766
Total interest income
675,265
642,137
675,265
642,137
Notes to the financial statements (continued)
133
LifeStar Insurance p.l.c. – Annual Financial Report 2023
7.Expenses by nature
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Professional fees
686,721
829,641
626,042
785,935
Management fees (Note 27)
990,717
893,485
990,717
893,485
Recharged expenses
-
133,835
-
-
Amortisation of computer software (Note 10)
239,210
242,830
239,210
242,830
IT related expenses
488,398
553,798
355,384
432,232
Commission and direct marketing costs
2,417,936
2,633,804
2,324,666
2,566,981
Depreciation of plant and machinery (Note 11)
132,304
89,113
130,895
88,467
Other expenses
1,333,686
672,716
1,152,479
420,928
Bank charges
58,734
76,784
58,734
76,784
Licences and insurance
466,079
176,932
466,079
176,932
Office Expense
111,210
79,913
111,210
79,913
Wages and salaries recharged from group undertaking
2,607,225
2,128,274
1,766,200
1,334,058
Investment management expense
164,500
-
-
-
Short-term leases (Note 10)
43,972
84,036
19,522
12,374
Eliminations from application of IFRS 17
(2,809,396)
(2,659,336)
(2,809,396)
(2,659,336)
6,931,296
5,935,825
5,431,742
4,451,583
Notes to the financial statements (continued)
134
LifeStar Insurance p.l.c. – Annual Financial Report 2023
7.Expenses by nature (continued)
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Amounts attributed to insurance acquisition cash flows incurred during the year
(2,993,880)
(2,737,026)
(2,993,880)
(2,737,026)
Amortisation of insurance acquisition cash flows
184,484
77,690
184,484
77,690
Represented by:
Insurance service expenses
1,175,856
1,477,896
1,175,856
1,477,896
Other operating expenses
5,755,440
4,457,929
4,255,886
2,973,687
Auditor’s remuneration for the current financial year amounted to €163,400 (2022: €117,500). Other fees payable to the auditor comprise €30,000 (2022: €28,500) for other assurance services and €2,825 (2022: €2,575) for tax services.
Notes to the financial statements (continued)
135
LifeStar Insurance p.l.c. – Annual Financial Report 2023
8.Finance costs

|  | Consolidated and
|  | separate
| 2023 | 2022
| € | €
Interest expense on bonds | 97,252 | 96,962

9.Tax (credit)/charge
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Current tax
157,182
131,751
(15,242)
1,451
Deferred tax charge/ (credit) (Note 21)
409,976
(1,820,457)
406,691
(1,824,967)
Tax (credit)/ charge
567,158
(1,688,706)
391,449
(1,823,516)
Income tax recognised in other comprehensive income is as follows:

| Consolidated and separate
| 2023 | 2022
| € | €
Deferred tax |  |
Revaluations of available-for-sale financial assets | - | 339,556

Notes to the financial statements (continued)
136
LifeStar Insurance p.l.c. – Annual Financial Report 2023
9.Tax (credit)/charge (continued)
The tax on the Group’s (loss) / profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

|  | Consolidated |  | Holding Company
| 2023 | 2022 | 2023 | 2022
| € | € | € | €
(Loss) / Profit before tax | 1,577,645 | (4,023,126) | 1,762,720 | (3,887,959)
Theoretical tax charge at 35% | 552,176 | (1,408,094) | 616,952 | (1,360,786)
Tax effect of: |  |  |  |
Income taxed at lower rates | 13,642 | (2,742) | 13,642 | (2,742)
Adjustment for income not subject to tax | (82,119) | (117,706) | (82,119) | (117,706)
Group loss claimed | - | - | 2,590 | -
Disallowable expenses for tax purposes | (15,960) | 8,040 | (15,960) | 8,040
Adjustment relating to prior year taxation | - | (267,131) | - | (267,131)
Adjustment for tax rates differences on investment property revaluation | - | - | - | -
Dividends received from the untaxed account and FTA | (137,013) | (191,262) | (137,013) | (191,262)
Unrelieved foreign tax | - | - | - | -
Other | 236,432 | 290,189 | (6,643) | 108,071
Tax credit / (charge) | 567,158 | (1,688,706) | 391,449 | (1,823,516)

10.Directors’ emoluments
All directors’ emoluments are recharged by the intermediate parent company.
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Directors' fee
243,711
135,576
224,262
68,521
Notes to the financial statements (continued)
137
LifeStar Insurance p.l.c. – Annual Financial Report 2023
11.Intangible assets
Consolidated
Goodwill
Value of in-force business
Computer software
Passporting asset
Total
€
€
€
€
€
Year ended 31 December 202 3
Opening carrying amount
311,538
-
2,117,097
221,103
2,649,738
Additions
-
-
1,126,170
32,162
1,158,332
Reclassification
-
-
-
-
-
Impairment recovery
-
-
-
-
-
Amortisation charge (Note 6)
-
-
(239,877)
-
(239,877)
Closing carrying amount
311,538
-
3,003,390
253,265
3,568,193
At 31 December 202 3
Cost or valuation
311,538
-
5,011,322
253,265
5,576,125
Accumulated amortisation
-
-
(2,007,932)
-
(2,007,932)
Net book amount
311,538
-
3,003,390
253,265
3,568,193
Year ended 31 December 202 2
Opening net book amount
311,538
11,929,714
1,931,487
-
14,172,739
Initial adoption of IFRS 17
-
(11,929,714)
-
-
(11,929,714)
As restated
311,538
-
1,931,487
-
2,243,025
Additions
-
-
425,549
-
425,549
Reclassification
-
-
-
220,000
220,000
Impairment recovery
-
-
2,890
1,103
3,993
Amortisation charge (Note 6)
-
-
(242,829)
-
(242,829)
Net book amount
311,538
-
2,117,097
221,103
2,649,738
At 31 December 202 2
Cost or valuation
311,538
-
3,885,152
221,103
4,417,793
Accumulated amortisation
-
-
(1,768,055)
-
(1,768,055)
Net book amount
311,538
-
2,117,097
221,103
2,649,738
Notes to the financial statements (continued)
138
LifeStar Insurance p.l.c. – Annual Financial Report 2023
11.Intangible assets (continued)
Holding Company
Value of in-force business
Computer software
Passporting asset
Total
€
€
€
€
Year ended 31 December 2023
Opening net book amount
-
2,076,309
221,103
2,297,412
Additions
-
1,126,170
32,162
1,158,332
Amortisation charge (Note 6)
-
(239,210)
-
(239,210)
Closing carrying amount
-
2,963,269
253,265
3,216,534
At 31 December 2023
Cost or valuation
-
4,951,065
253,265
5,204,330
Accumulated amortisation
-
(1,987,796)
-
(1,987,796)
Carrying amount
-
2,963,269
253,265
3,216,534
Year ended 31 December 2022
Opening net book amount
11,929,714
1,911,391
-
13,841,105
Initial adoption of IFRS 17
(11,929,714)
-
-
(11,929,714)
Restated balance
-
1,911,391
-
1,911,391
Additions
-
407,747
-
407,747
Reclassification
-
-
220,000
220,000
Impairment recovery
-
-
1,103
1,103
Amortisation charge (Note 7)
-
(242,829)
-
(242,829)
Net book amount
-
2,076,309
221,103
2,297,412
At 31 December 2022
Cost or valuation
-
3,824,905
221,103
4,046,008
Accumulated amortisation
-
(1,748,596)
-
(1,748,596)
Carrying amount
-
2,076,309
221,103
2,297,412
Notes to the financial statements (continued)
139
LifeStar Insurance p.l.c. – Annual Financial Report 2023
12.Leases
(a)Leases as the lessee (IFRS 16)
The Group leases property which generally run for a period of two years with the option to renew. Lease payments are subsequently renegotiated to reflect market rates.
(i)Right-of-use assets
Right-of-use asset related to leased 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.

| Consolidated and separate
| 202 3 | 202 2
| € | €
Balance on 1 January | 1,530 | 7,650
Additions | 14,772 | -
Depreciation for the year | (6,377) | (6,120)
Balance on 31 December | 9,925 | 1,530

(ii)Amounts recognised in profit or loss

| Consolidated and separate
| 202 3 | 202 2
| € | €
Depreciation of right-of-use asset | 6,377 | 6,120
Interest expense on lease liabilities | 388 | 768

(iii)Amounts recognised in statement of cash flows

| Consolidated and separate
| 202 3 | 202 2
| € | €
Total cash outflows for leases | 5,688 | 7,210

(iv)Lease liability
The net value of the lease liability as at 31 December 2023 was €9,457 (2022: €1,780).
Notes to the financial statements (continued)
140
LifeStar Insurance p.l.c. – Annual Financial Report 2023
12.Leases (continued)
(a)Leases as the lessor (IFRS 16)
The Group leases out certain property. Note 13 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 under IFRS 16

| Consolidated and separate
| 202 3 | 202 2
| € | €
Less than one year | 146,964 | 220,450
One to two years | 81,375 | 127,306
Two to three years | 85,443 | 100,000
| 313,782 | 447,756

Notes to the financial statements (continued)
141
LifeStar Insurance p.l.c. – Annual Financial Report 2023
13.Property, plant and equipment

|  |  | Consolidated |  |  | Holding Company
| Land and buildings | Office furniture, fittings and equipment | Total | Land and building | Office furniture, fittings and equipment | Total
| € | € | € | € | € | €
Year ended 31 December 2023 |  |  |  |  |  |
Opening net book amount | 3,578,873 | 37,383 | 3,616,256 | 3,578,873 | 35,635 | 3,614,508
Additions | 10,856 | 50,976 | 61,832 | 10,857 | 49,438 | 60,295
Revaluation for the year | 44,292 | - | 44,292 | 44,292 | - | 44,292
Depreciation charge | (97,007) | (34,629) | (131,636) | (97,007) | (33,887) | (130,894)
Net book amount | 3,537,014 | 53,730 | 3,590,744 | 3,537,015 | 51,186 | 3,588,201
At 31 December 2023 |  |  |  |  |  |
Revalued amount/Cost | 4,174,594 | 1,672,702 | 5,847,296 | 4,174,594 | 1,623,973 | 5,798,567
Accumulated depreciation | (637,580) | (1,618,972) | (2,256,552) | (637,579) | (1,572,787) | (2,210,366)
Net book amount | 3,537,014 | 53,730 | 3,590,744 | 3,537,015 | 51,186 | 3,588,201

Notes to the financial statements (continued)
142
LifeStar Insurance p.l.c. – Annual Financial Report 2023
13.Property, plant and equipment (continued)

|  |  | Consolidated |  |  | Holding Company
| Land and buildings | Office furniture, fittings and equipment | Total | Land and building | Office furniture, fittings and equipment | Total
| € | € | € | € | € | €
Year ended 31 December 2022 |  |  |  |  |  |
Opening net book amount | 3,523,673 | 62,227 | 3,585,900 | 3,523,673 | 61,106 | 3,584,779
Additions | 152,042 | 4,243 | 156,285 | 152,041 | 2,970 | 155,011
Impairment losses for the year | (75,597) |  | (75,597) | (75,597) | - | (75,597)
Reclassified from investment property | 38,761 | - | 38,761 | 38,761 | - | 38,761
Depreciation charge | (60,005) | (29,088) | (89,093) | (60,005) | (28,441) | (88,446)
Net book amount | 3,578,874 | 37,382 | 3,616,256 | 3,578,873 | 35,635 | 3,614,508
At 31 December 2022 |  |  |  |  |  |
Revalued amount/cost | 4,119,446 | 1,621,726 | 5,741,172 | 4,119,445 | 1,574,535 | 5,693,980
Accumulated depreciation and impairment | (540,572) | (1,584,344) | (2,124,916) | (540,572) | (1,538,900) | (2,079,472)
Net book amount | 3,578,874 | 37,382 | 3,616,256 | 3,578,873 | 35,635 | 3,614,508

€1,839,366 (2022: €1,764,773) worth of office furniture, fittings and equipment assets are fully depreciated and is still in use.
During the year, the Group and the Company have performed an external revaluation of property, plant and equipment. During 2022, the Group and the Company have incurred an overall gain as the fair value was higher than the asset’s carrying amount. Further detail about the valuation technique to derive the fair value less cost to sell is set out in Note 14.
Notes to the financial statements (continued)
143
LifeStar Insurance p.l.c. – Annual Financial Report 2023
14.Investment property

| Consolidated and separate
| €
Year ended 31 December 2023 |
Opening net book amount | 15,835,731
Increase in fair value | 15,708
Closing net book amount | 15,851,439
At 31 December 2023 |
Cost | 4,422,306
Accumulated fair value gains | 11,429,133
Net book amount | 15,851,439
Year ended 31 December 2022 |
Opening net book amount | 16,208,895
Reclassification to property, plant and equipment | (38,760)
Decrease in fair value | (334,404)
Closing net book amount | 15,835,731
At 31 December 2022 |
Cost | 4,422,306
Accumulated fair value gains | 11,413,425
Net book amount | 15,835,731

Details about the Group’s investment properties, including those classified as assets held-for-sale, and information about the fair value hierarchy at 31 December 2023 and 2022 are as follows:

| Consolidated and separate
| Fair value measurement at end of the reporting period using:
| Level 1 | Level 2 | Level 3 | Total
| € | € | € | €
2023 |  |  |  |
Investment property: |  |  |  |
Local property | - | - | 15,851,439 | 15,851,439
Foreign property | - | - | - | -
Total | - | - | 15,851,439 | 15,851,439

Notes to the financial statements (continued)
144
LifeStar Insurance p.l.c. – Annual Financial Report 2023
14.Investment property (continued)

| Consolidated and separate
| Fair value measurement at end of the reporting period using:
| Level 1 | Level 2 | Level 3 | Total
| € | € | € | €
2022 |  |  |  |
Investment property: |  |  |  |
Local property | - | - | 15,835,731 | 15,835,731
Foreign property | - | - | - | -
Total | - | - | 15,835,731 | 15,835,731

In estimating the fair value of the properties, the highest and best use of the properties is their current use. In accordance with the Group's accounting policy, the valuation of investment properties is assessed by the Board of Directors at the end of every reporting period.
During 2023, the Group revalued its investment property on the basis of valuations obtained from an independent professionally qualified valuer. The fair value movements in relation to investment property during 2023 were credited to profit or loss and are presented within ‘Investment return and fair value movements’. Fair value movements in relation to property classified for “own use” were credited to Other Comprehensive Income.
During 2022, the Group did not obtain any valuations from an independent professionally qualified valuer but the Group has done an internal impairment assessment on all the properties and an impairment charge was made on certain properties. This impairment charge was approved by the Board of Directors. The fair value movements in relation to investment property during 2022 were debited to profit or loss and are presented within ‘Investment return and fair value movements’ (refer Note 4).
During 2022, the foreign property has been sold for €190,000.
The table below includes further information about the Group’s Level 3 fair value measurements for local properties:

2023/2022 | Significant unobservable input | Narrative sensitivity
Local properties | Rental value per square metre, ranging from €150 to €400 (2022: €150 to €400) | The higher the price per square metre, the higher the fair value
| Rent growth of 2.85% (2022: 2.85%) per annum | The higher the rent growth, the higher the fair value
| Discount rate of 5.55% (2022: 5.55%) | The higher the discount rate, the lower the fair value

Notes to the financial statements (continued)
145
LifeStar Insurance p.l.c. – Annual Financial Report 2023
14.Investment property (continued)
Details about the Group’s investment properties classified as Level 3 at 31 December 2023 and 2022 are as follows:

| Consolidated and separate
| Local |
| property | Total
| € | €
Year ended 31 December 2023 |  |
At the beginning of the year | 15,835,731 | 15,835,731
Fair value gains | 15,708 | 15,708
At end of year | 15,851,439 | 15,851,439
|  | Consolidated and separate
| Local |
| property | Total
| € | €
Year ended 31 December 2022 |  |
At the beginning of the year | 6,208,895 | 16,208,895
Reclassification | (38,760) | (38,760)
Fair value losses | (334,404) | (334,404)
At end of year | 15,835,731 | 15,835,731

Operating leases relate to the investment property owned by the Group with lease terms of between 1 to 5 years. The lessee does not have an option to purchase the property at the expiry of the lease period. The rental income earned, under operating leases, amounted to €249,394 (2022: €356,147).
Notes to the financial statements (continued)
146
LifeStar Insurance p.l.c. – Annual Financial Report 2023
15.Investments in group undertakings

|  | Separate
| 2023 | 2022
| € | €
Cost |  |
Year ended 31 December | 1,048,218 | 1,048,218

The Company as at 31 December 2023 has direct investment in the following subsidiary undertakings:

Group undertakings | Registered office | Class of shares held | Percentage of shares held |
|  |  | 2023 | 2022
LifeStar Health Limited | Testaferrata Street, Ta Xbiex | Ordinary ‘A’ | 100% | 100%

The principal activity of LifeStar Health Limited is to carry on business of an agent in all classes of health insurance, in terms of the Insurance Intermediaries Act (Cap. 487 of the Laws of Malta).
LifeStar Health Limited has also issued non-profit participating ‘B’ shares to other subscribers. The subscribers of such ‘B’ shares are not entitled to a share of profits generated by LifeStar Health Limited, and hence the Company is deemed to have 100% of ownership interest. The distribution of dividends by LifeStar Health Limited is restricted by the own funds requirements of the Insurance Intermediaries Act (Cap. 487 of the Laws of Malta).

| Separate
| 2023 | 2022
| € | €
Capital and reserves |  |
LifeStar Health Limited | 982,431 | 1,168,932

Notes to the financial statements (continued)
147
LifeStar Insurance p.l.c. – Annual Financial Report 2023
16.Other investments
The Group’s investments are summarised by measurement category in the table below:

| Consolidated and separate
| 2023 | 2022
| € | €
Financial assets mandatorily at FVTPL | 76,423,665 | -
Financial assets designated at FVTPL | 17,419,620 | -
Fair value through profit or loss under IAS 39 | - | 77,980,898
Available-for-sale investments | - | 2,759,131
Investments in equity measured at cost | - | 2,076,599
Loans and receivables | 3,134,171 | 3,112,576
Term deposits | - | 1,500,000
Total investments | 96,977,456 | 87,429,204

(a)Investments at fair value through profit or loss
Consolidated and separate
2023
2022
€
€
Equity securities and units in unit trusts:
Listed shares
25,809,379
20,297,067
Unlisted investments
3,167,506
3,245,775
Collective investment schemes
755,460
732,818
29,732,345
24,275,660
Assets held to cover linked liabilities:
Collective investment schemes
46,691,320
32,042,443
Debt securities - fixed interest rate:
Government bonds
9,643,160
11,957,843
Corporate bonds
7,776,460
9,704,952
17,419,620
21,662,795
Total investments at fair value through profit or loss
93,843,285
77,980,898
Maturity of fixed income debt securities classified as fair value through profit or loss.
Notes to the financial statements (continued)
148
LifeStar Insurance p.l.c. – Annual Financial Report 2023
16.Other investments (continued)

| Consolidated and separate
| 2023 | 2022
| € | €
Within 1 year | 154,042 | 803,410
Between 1 and 2 years | 731,994 | 931,470
Between 2 and 5 years | 7,392,533 | 7,425,342
Over 5 years | 9,141,051 | 12,502,573
| 17,419,620 | 21,662,795
| Consolidated and separate
| % | %
Weighted average effective interest rate at the balance sheet date | 6 | 6

All other securities classified at fair value through profit or loss are non-current in nature.
The movements in investments classified as fair value through profit or loss are summarised as follows:
Consolidated and separate
2023
2022
€
€
Year ended 31 December
Balance at 1 January
77,980,898
82,499,812
Impact on initial application of IFRS 9
4,835,730
-
Additions
18,033,405
8,927,610
Disposals
(7,652,240)
(10,105,845)
Net fair value and foreign exchange movements
645,492
(3,340,679)
Balance at 31 December
93,843,285
77,980,898
At 31 December
Cost
86,814,675
71,597,776
Accumulated fair value and foreign exchange gains
7,028,610
6,383,122
Net book amount
93,843,285
77,980,898
Notes to the financial statements (continued)
149
LifeStar Insurance p.l.c. – Annual Financial Report 2023
16.Other investments (continued)
The table below analyses debt securities classified at fair value through profit or loss by sector:

| Consolidated and separate
| 2023 | 2022
| € | €
Banks | 1,441,156 | 1,568,912
Energy | 2,930,104 | 718,520
Government | 9,643,160 | 11,957,844
Other | 3,405,200 | 7,417,519
| 17,419,620 | 21,662,795

(b)Available-for-sale investments

| Consolidated and separate
| 2023 | 2022
| € | €
Equity securities | - | 2,759,131
Total investments at available-for-sale | - | 2,759,131

The movements in investments classified as available-for-sale are summarised as follows:
Consolidated and separate
2023
2022
Year ended 31 December
€
€
Balance at 1 January
2,759,131
1,838,107
Reclassification upon adoption of IFRS 9
(2,759,131)
-
Additions
-
433,313
Disposals
-
(482,447)
Net fair value movement
-
970,158
Balance at 31 December
-
2,759,131
At 31 December
Cost
-
1,921,639
Accumulated fair value and foreign currency movements
-
837,492
Net book amount
-
2,759,131
Notes to the financial statements (continued)
150
LifeStar Insurance p.l.c. – Annual Financial Report 2023
16.Other investments (continued)
(c)Investments in equity measured at cost
Consolidated and separate
2023
2022
€
€
Equity securities
-
2,076,599
The movements in investments classified as equity measured at cost are summarised as follows:
Consolidated and separate
2023
2022
€
€
Year ended 31 December
Balance at 1 January
2,076,599
1,457,336
Reclassification upon adoption of IFRS 9
(2,076,599)
-
Additions
-
1,194,373
Impairment loss
-
(477,846)
Foreign currency movement
-
(97,264)
Balance at 31 December
-
2,076,599
The ultimate shareholder of LifeStar Insurance p.l.c. is a director of the foreign investment previously classified as investment in equity measured at cost, with a carrying amount as at 31 December 2022 of €2,076,599. This investment is in a start-up fintech company and given the embryonic stage of the company and of the industry itself, the Directors believed that the variability in the range of the reasonable fair value measurement was significant and the probabilities of the various estimates could not be reasonably assessed. In view of this, the Group did not measure this investment at fair value during the prior year and its carrying amount was equivalent to price paid at settlement date to acquire this instrument net of any impairment losses.
(d)Loans and receivables

| Consolidated and separate
| 2023 2022
| €€
Loans secured on policies | 8,451 25,529
Other loans and receivables | 3,125,720 3,087,047
| 3,134,171 3,112,576

Notes to the financial statements (continued)
151
LifeStar Insurance p.l.c. – Annual Financial Report 2023
16.Other investments (continued)
(d)Loans and receivables (continued)
Loans secured on policies are substantially non-current in nature. Other 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 intends to sell in the short term. They are charged with interest at the rate of 12% (2022: 12%) per annum.
Consolidated and separate
2023
2022
€
€
Year ended 31 December
Balance at 1 January
3,112,576
3,324,469
Additions
63,013
-
Disposals
-
(10,766)
Amortisation of premium
(24,340)
(31,093)
(Provision for impairment) / reversal of the provision for impairment
(17,078)
(170,034)
Balance at 31 December
3,134,171
3,112,576
(e)Unlisted investments
Included with unlisted investments (Note 16(a)) and loans and receivables (Note 16(d)) are amounts of € 3,167,506 and € 3,125,720 respectively, relating to investments made in previous years by the Company in three securitisation vehicles (SVs) registered in Luxembourg. The Company's investments are backed by investments which the SVs made in a UK data centre and in a biomass project in Brazil. At 31 December 2023, the Company obtained confirmation of the values of its investments in the SVs which confirm that the Company's investments are not impaired. Given the nature and complexity of the investments and the fact that the underlying investments have not yet reached the mature stage of their development, the Company will in the immediate future be commissioning an independent valuation of its investments in the SVs.
17.Receivables, prepayments and accrued income

| Consolidated | Holding Company
| 2023 | 2022 | 2023 | 2022
| € | € | € | €
Amounts due from intermediate parent (Note ii) | 6,717,000 | 6,883,546 | 6,846,382 | 6,883,546
Amount receivable from subsidiary | - | - | 500,000 | 500,000
Amounts due from related parties (Note iii) | 5,015,786 | 5,185,332 | 5,217,119 | 5,016,973
Other receivables (Note i and iv) | 876,549 | 403,113 | 283,930 | 328,280
| 12,609,335 | 12,471,991 | 12,847,431 | 12,728,799

Notes to the financial statements (continued)
152
LifeStar Insurance p.l.c. – Annual Financial Report 2023
17.Receivables, prepayments and accrued income (continued)
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Prepayments and accrued income:
- Prepayments
479,016
265,112
428,910
205,724
- Accrued income
3,050,208
2,417,656
2,510,789
1,881,684
3,529,224
2,682,768
2,939,699
2,087,408
At end of year
16,138,559
15,154,759
15,787,130
14,816,207
i.Interest-bearing automatic premium loans are classified as investments in Note 16 to the financial statements.
ii.Amounts due from intermediate parent are secured, bearing interest at 3% or 4.5% and expected to be repaid between 5 and 10 years’ time. The carrying amount is stated net of a provision of €255,891 (2022: €255,891).
The loans in question have been approved by the Malta Financial Services Authority.
The Directors are confident that such balances will be recovered within the stipulated time frame above. A proposal on the repayment in full of these loans is currently in discussions with the MFSA.
iii.Amounts due from other related parties are secured and bear interest at 3% or 4.5% and as at 31 December 2023 the Directors expect these to be repaid in 5 and 10 years’ time in accordance with the agreements. The carrying amount is stated net of a provision of €129,383 (2022: €129,383). Such balance has been carried forward prior to 1 January 2017.
iv.Other receivables are unsecured, interest-free and repayable on demand. They are stated net of provision for impairment of €30,042 (2022: €8,051). The movement of €21,991 (2022: €18,407) is included in the statement of comprehensive income non-technical.
Amounts due from intermediate parent and other related parties are non-current in nature, whilst the rest of the amounts are current in nature.
18.Share capital

| Consolidated and separate
|  | 2023
| Authorised | Issued and called up
| € | €
353,411,942 ordinary shares of €0.141478 each, |  |
64,814,817 of which were issued and called up | 50,000,000 | 9,169,870
| 50,000,000 | 9,169,870

Notes to the financial statements (continued)
153
LifeStar Insurance p.l.c. – Annual Financial Report 2023
18.Share capital (continued)

| Consolidated and separate
|  | 2022
| Authorised | Issued and called up
| € | €
353,411,942 ordinary shares of €0.141478 each, |  |
64,814,817 of which were issued and called up | 50,000,000 | 9,169,870
| 50,000,000 | 9,169,870

During the prior year, the shareholders of the Company resolved increased and re-denominated its entire authorised share capital from 4,656,560 ordinary shares and 343,440 redeemable preference shares of €2.329373 each to 353,411,942 ordinary shares of €0.1414779585 each, which was effected on 26 April 2021. It was also resolved to re-designate the redeemable preference shares to ordinary shares as aforementioned.
Retained earnings
As noted in Note 17, amounts due from the intermediate parent are unsecured, interest-free and expected to be repaid between 5 and 10 years’ time. The carrying amount has been adjusted for the time-value of money and is stated net of provision of €255,891 (2022: €255,891).
Capital management
The Group’s objectives when managing capital are:
(i)to comply with the insurance capital requirements required by the Maltese insurance regulator, the MFSA;
(ii)to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
(iii)to provide an adequate return to shareholders by pricing insurance contracts commensurate with the level of risk.
In order to maintain or adjust the capital structure, the Group may issue new shares or capitalise contributions received from its shareholders.
As of 1 January 2016, the Solvency II Directive (2009/138/EC) came into force with new regulatory requirements that ascertain the level of capital required on the basis of the risks the Company undertakes. Solvency II also outlines how the Own Funds shall be derived by converting the statement of financial position from an IFRS perspective to one where assets and liabilities are measured in line with their underlying economic value.
The Directors are actively involved in the implementation of the Solvency II rules and these are highly embedded in the Company’s operations and regular monitoring of the Solvency Capital Requirement (“SCR”) is considered crucial.
The Company is required to hold regulatory capital for its long term insurance business in compliance with the Solvency II Directive. The Solvency II Directive stipulates the Minimum Capital Requirement (“MCR”) and the SCR that the Company is required to hold. The MCR and SCR must be maintained at all times throughout the year.
Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
18.Share capital (continued)
Based on the audited SCR calculations as at 31 December 2023, the Company has complied with the capital and solvency requirements as stipulated in the rules issued by the MFSA. Going forward, the Company is also expected to continue meeting the Solvency II requirements, based on the projected SCR calculations included in the 2022 ORSA report. In the case of any solvency gap, the Directors have put in place a capital plan aimed to ensure that the Company will have adequate ‘Own Funds’ to meet the required SCR.
19.Dividends paid and declared
No dividend was paid or declared during the year (2022: €Nil) to ordinary shareholders.
20.Other reserves

|  |  | Consolidated
| Other unrealised gains | Property revaluation reserve | Total
| € | € | €
Year ended 31 December 2023 |  |  |
At beginning of year | 418,600 | 1,110,096 | 1,528,696
Revaluation of property (Note 13) | - | 44,292 | 44,292
At end of year | 418,600 | 1,154,388 | 1,572,988
Year ended 31 December 2022 |  |  |
At beginning of year | 11,953,253 | 1,185,693 | 13,138,946
Impact of initial application of IFRS 17 | (11,534,653) | - | (11,534,653)
Restated opening balance | 418,600 | 1,185,693 | 1,604,293
Revaluation of property (Note 13) | - | (75,597) | (75,597)
At end of year | 418,600 | 1,110,096 | 1,528,696

Notes to the financial statements (continued)
155
LifeStar Insurance p.l.c. – Annual Financial Report 2023
20.Other reserves (continued)
Holding Company
Other unrealised gains
Property revaluation reserve
Total
€
€
€
Year ended 31 December 2023
At beginning of year
255,420
1,110,095
1,365,515
Revaluation of property (Note 13)
-
44,292
44,292
At end of year
255,420
1,154,387
1,409,807
Year ended 31 December 2022
At beginning of year
11,790,073
1,185,693
12,975,766
Impact of initial application of IFRS 17
(11,534,653)
-
(11,534,653)
Restated opening balance
255,420
1,185,693
1,441,113
Revaluation of property (Note 13)
-
(75,598)
(75,598)
At end of year
255,420
1,110,095
1,365,515
The above reserves are not distributable.
The property revaluation reserve represents the difference between the carrying amount of the property and its fair value at the date when the Directors reassessed its use from an owner-occupied one to a property held to earn rentals or for capital appreciation.
21.Deferred income tax
Deferred taxes are calculated on temporary differences under the balance sheet liability method using a principal tax rate ranging between 8% and 35% (2022: 8% and 35%). In particular, temporary differences on investment properties situated in Malta that have been owned by the Group since 1 January 2004 are calculated under the liability method using a principal tax rate of 8% of the carrying amount, while investment properties situated in Malta that had been acquired by the Group before 1 January 2004 are calculated under the liability method using a principal tax rate of 10% of the carrying amount. Deferred tax on temporary differences on investment properties situated outside Malta has been calculated based on tax rates that have been enacted or substantively enacted at the end of the reporting period.
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 and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
21.Deferred income tax (continued)
The movement on the deferred tax asset account is as follows:

|  | Consolidated and Separate
| 2023 | 2022
| € | €
Year ended 31 December |  |
At beginning of year | 1,645,016 | -
Reclassified to deferred tax liability | (60,328) | (501,905)
Deferred tax charged to other comprehensive income | - | -
Deferred tax credited (charged) to profit and loss account (Note 8) | (347,702) | 2,146,921
At end of year | 1,236,986 | 1,645,016

Deferred income taxes are calculated on temporary differences under the liability method using a principal tax rate of 35% (2022: 35%).
The movement on the deferred tax liability account is as follows:

|  | Consolidated |  | Separate
Year ended 31 December | 2023 | 2022 | 2023 | 2022
| € | € | € | €
At the beginning of the year | 1,494,266 | 1,669,703 | 1,488,529 | 1,668,480
Reclassification to deferred tax assets | (60,328) | (501,901) | (60,328) | (501,905)
Debited to other comprehensive income (Note 8) | - | - | - | -
Debited/(credited) to profit and loss account (Note 8) | 62,274 | 326,464 | 58,989 | 321,954
At end of year | 1,496,212 | 1,494,266 | 1,487,190 | 1,488,529

Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
21.Deferred income tax (continued)
The net deferred taxation at the year-end comprises the following temporary differences:

|  | Consolidated |  | Separate
Year ended 31 December | 2023 | 2022 | 2023 | 2022
| € | € | € | €
Fair value losses on investments | (902,277) | (728,664) | (902,277) | (728,664)
Losses carried forward | - | - | - | -
Property taxable at 8% or 10% | 151,795 | 155,146 | 151,795 | 155,146
Temporary differences on: |  |  |  |
-property, plant and equipment | (48,627) | 26,124 | (57,649) | 20,387
-investment property | 1,316,115 | 1,312,764 | 1,316,115 | 1,312,764
-leases unutilized under IFRS 16 | 19,280 | 232 | 19,280 | 232
-unutilized tax losses and capital allowances | (262,033) | (423,170) | (262,033) | (423,170)
-other | (15,027) | (493,182) | (15,027) | (493,182)
Net deferred income tax liability/(asset) | 259,226 | (150,750) | 250,204 | (156,487)

The directors consider that the above temporary differences are substantially non-current in nature.
22.Debt securities in issue

|  | Consolidated |  | Separate
Year ended 31 December | 2023 | 2022 | 2023 | 2022
| € | € | € | €
4% Unsecured Subordinated Bonds Due 2026 – 2031 | 2,182,945 | 2,144,949 | 2,182,945 | 2,144,949
| 2,182,945 | 2,144,949 | 2,182,945 | 2,144,949

In May 2021, the company issued 100,000 4% unsecured subordinated bonds of a nominal value of €100 per bond. A total of 24,313 Subordinated Bonds (for a total value of €2,431,300) were received by the Company.
The bonds are redeemable at their nominal value on 2 June 2031, unless redeemed early on any interest payment date in the year 2026 and 2031.
Interest on the bonds is due and payable annually on 2 June of each year.
Notes to the financial statements (continued)
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22.Debt securities in issue (continued)
The bonds are listed on the Official List of the Malta Stock Exchange. The carrying amount of the bonds is net of direct issue costs of €253,597 (2022: €291,593) which are being amortised over the life of the bonds. The market value of debt securities on the last trading day before the statement of financial position date was €2,431,000 (2022: €2,431,000).
23.Payables, accruals and deferred income
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Amounts due to immediate parent undertaking
-
-
-
-
Amounts due to group undertaking
33,134
33,919
-
-
Amounts due to subsidiary undertaking
-
-
-
-
Other payables
582,902
101,878
54,413
101,878
616,036
135,797
54,413
101,878
Accruals and deferred income
- Accruals
424,485
537,940
250,345
337,224
- Bond interest accrued
56,220
56,220
56,220
56,220
- Deferred income
369,118
221,797
30,354
57,599
849,823
815,957
336,919
451,043
At end of year
1,465,859
951,754
391,332
552,921
(i)Other payables are unsecured, non-interest bearing and fall due within the next twelve months;
(ii)Amounts owed to group and subsidiary undertakings are unsecured and bear no interest. These balances are repayable on demand.
Notes to the financial statements (continued)
159
LifeStar Insurance p.l.c. – Annual Financial Report 2023
24.Cash generated from operations
Reconciliation of profit before tax to cash generated from operations:

|  | Consolidated |  | Holding Company
| 2023 | 2022 | 2023 | 2022
| € | € | € | €
Cash flows generated from operating activities |  |  |  |
(Loss) / Profit before tax | 1,577,644 | (4,023,125) | 1,762,719 | (3,887,959)
Adjustments for: |  |  |  |
Amortisation on computer software (Note 10) | 239,877 | 242,829 | 239,210 | 242,829
Reversal of impairment on intangible assets | - | (3,991) | - | (1,102)
Reversal of amortisation of lease | 6,377 | 6,120 | 6,377 | 6,120
Depreciation of property, plant and equipment (Note 12) | 131,637 | 89,093 | 130,894 | 88,447
Finance cost on borrowings | 97,252 | 96,962 | 97,252 | 96,962
Net fair value movement on investment property (Note 14) | (15,708) | 334,403 | (15,708) | 334,403
Amortisation of premium – Loans and Receivables (Note 16) | 24,340 | 31,093 | 24,340 | 31,093
Provision for impairment / (reversal of provision) – Loans and |  |  |  |
Receivables (Note 14) | 39,069 | 188,441 | 39,069 | 188,441
Net fair value & FX movement on FVTPL investments (Note 16) | (645,492) | 2,775,246 | (645,492) | 2,775,246
Other non-cash movements | (1,978,881) | (1,425,457) | (1,978,885) | (2,619,830)
Interest income (Note 5) | (675,265) | (642,137) | (675,265) | (642,137)
Dividend from subsidiary | - | - | (596,364) | (500,000)
Other movements | - | - | - | -

Notes to the financial statements (continued)
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LifeStar Insurance p.l.c. – Annual Financial Report 2023
24.Cash generated from operations (continued)
Consolidated
Holding Company
2023
2022
2023
2022
€
€
€
€
Impairment on other equity measured at cost (Note 16)
-
477,846
-
477,846
Foreign exchange movement on other equity measured at cost (Note 16)
-
97,264
-
97,264
Movement in:
-Insurance and reinsurance contracts
8,019,821
(4,748,322)
8,019,821
(4,748,322)
-Trade and other receivables
(330,526)
225,218
(317,649)
410,508
-Investment contract liabilities
82,483
417,071
82,483
417,071
-Trade and other payables
311,488
(365,722)
(262,652)
(382,197)
Cash flows generated from operations
6,884,116
(6,227,168)
5,910,150
(7,615,317)
25.Cash and cash equivalents
For the purposes of the statement of cash flows, the year-end cash and cash equivalents comprise the following:

|  | Consolidated |  | Holding Company
| 2023 | 2022 | 2023 | 2022
| € | € | € | €
Cash at bank and on hand | 4,921,302 | 5,962,294 | 3,497,079 | 4,851,135

Cash at bank earns interest on current deposits at floating rates.
Notes to the financial statements (continued)
161
LifeStar Insurance p.l.c. – Annual Financial Report 2023
26.Fair values of financial assets and financial liabilities
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 2023 and 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 liabilities, either directly (that is, as prices) or indirectly (that is, derived from prices (Level 2);
-Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs (Level 3)
Consolidated and separate
Fair value measurement at end of the reporting period using:
Level 1
Level 2
Total
€
€
€
2023
Assets
Other Investments:
Financial assets at fair value through profit or loss
47,151,965
46,691,320
93,843,285
Available-for-sale investments
-
-
-
Total
47,151,965
46,691,320
93,843,285
Liabilities
Unit linked financial instruments
-
5,419,502
5,419,502
Notes to the financial statements (continued)
162
LifeStar Insurance p.l.c. – Annual Financial Report 2023
26.Fair values of financial assets and financial liabilities (continued
Consolidated and separate
Fair value measurement at end of the reporting period using:
Level 1
Level 2
Total
€
€
€
2022
Assets
Other Investments:
Financial assets at fair value through profit or loss
45,938,455
32,042,443
77,980,898
Available-for-sale investments
2,759,131
-
2,759,131
Total
48,697,586
32,042,443
80,740,029
Liabilities
Unit linked financial instruments
-
5,337,019
5,337,019
At 31 December 2023 and 2022 the carrying amounts of financial assets and current financial liabilities approximated their fair values except for investment contracts with DPF and certain equity financial instruments classified as available-for-sale which was measured at cost amounting to €- (2022: €2,453,599). It is impracticable to determine the fair value of equity investment and the investment contracts with DPF due to the lack of a reliable basis to measure the future discretionary return that is a material feature of these contracts.
27.Related party transactions
All companies forming part of the LifeStar Group are considered by the directors to be related parties as these companies are also ultimately owned by LifeStar Holding p.l.c. Related parties that do not form part of the consolidated group include entities related by way of common directors and ultimate shareholders.
The following transactions were carried out by the Group with related parties:

| Consolidated and separate |
| 2023 | 2022
| € | €
Interest income from loans to the immediate parent | 261,458 | 261,458
Interest income from loans to other related undertakings | 136,308 | 136,308
Management fees charged by a related undertaking | 440,000 | 442,000
Expenses recharged by a immediate holding company | 550,717 | 450,000

Notes to the financial statements (continued)
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27.Related party transactions (continued)
Key management personnel during 2023 and 2022 comprised of the Board of Directors and the Managing Director of the Group. Total remuneration paid by the Group to its key management personnel amounted to €300,954 (2022: €185,330).
Amounts owed by or to group undertakings and other related parties are disclosed in Notes 15, 17 and 23 to these financial statements.
The compensation to directors in 2023 and 2022 is disclosed in Note 10 to the financial statements.
28.Contingent liability
During 2020, the Company gave a guarantee in favour of Bank of Valletta for the amount of €3 million, to secure, jointly and severally with other related parties, a bank loan of the same amount granted by that bank to LifeStar Holding p.l.c.
At 31 December 2023, the balance outstanding on the loan in the books of LifeStar Holding p.l.c. amounted to €1,528,665 (2022: €2,008,545).
The directors assessed the impact of this guarantee and concluded that it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation and have therefore treated this as a contingent liability.
29.Litigation and regulatory matters
On 4 April 2022, the Company instituted a lawsuit before the First Hall Civil Court again the Malta Financial Services Authority (the “Authority”), Mazars Consulting Limited (“Mazars”) and Mr Keith Cutajar, a sub-contractor of Mazars.
The Company has taken such judicial action to safeguard its legal right to communications which are privileged at law. This action follows the appointment of Mazars, on 26 November 2021, as an inspector in connection with an investigation by the Authority relating to the Company’s business and operations, and, inter alia, the powers conferred on Mazars by the Authority, on 25 January 2022, in relation to the Company's information and documents, including its privileged communications.
While the Company continues to co-operate with the Authority and Mazars in relation to the investigation of the Company, based on legal advice, it considers its right to privileged communications to be significantly prejudiced by the Authority’s actions. Accordingly, the Company intends to pursue all remedies available to it at law in this regard.
In June 2024, the Authority communicated the preliminary conclusions of its investigation to the Company. The Company considers that it has acted in compliance with its legal and regulatory obligations. The Company has also confirmed to the Authority its intention to engage in without prejudice discussions with the aim of concluding the process in an unprotracted and non-contentious manner.
Nevertheless, it remains inherently difficult to predict the outcome of any judicial proceedings and regulatory investigation. There are many factors that may affect the range of outcomes, and the resulting impact, of these matters. As a result, it is not possible to predict or quantify a range of possible outcomes, or the timing thereof, at this stage.
The Directors recognise the fact that the Company may be subject to reputational, legal and compliance risk due to the extent and complexity of its operations and its regulatory obligations. Given the increased levels of regulatory scrutiny experienced in recent years across the financial services industry, the level of inherent legal and compliance risk faced by the Company is expected to continue to remain high for the foreseeable future.
Notes to the financial statements (continued)
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29.Litigation and regulatory matters (continued)
The Company employs a range of policies and practices to mitigate such inherent risks and ensure they remain within its risk tolerance limits. Furthermore, the Company remains committed to adhere to it legal and regulatory obligations to meet its compliance requirement on an on-going basis at all times.
30.Statutory information
LifeStar Insurance p.l.c. is a public limited liability Group incorporated in Malta with registration number C29086. On 9 November 2020, Global Capital Life Insurance Limited was renamed and rebranded as LifeStar Insurance Limited. On 27 April 2021, the Company changed its status to a public limited liability company. The registered address of the Group is Testaferrata Street, Ta’ Xbiex. The parent company of LifeStar Insurance p.l.c. is LifeStar Holding p.l.c, a company registered in Malta, with its registered address at Testaferrata Street, Ta’ Xbiex.
At year end, the directors considered the ultimate controlling party to be Prof. Paolo Catalfamo who owns 99.99% (2022: 99.99%) of the issued share capital of Investar p.l.c., which is the single major shareholder owning directly 60.58% (2022: 65.48%) of the Company’s intermediate parent company, LifeStar Holding p.l.c, and indirectly – through shares held by GlobalCapital Financial Management Limited (C 30053) as nominee – in the Company’s intermediate parent company, LifeStar Holding p.l.c, a further 30.81% (2022: 31.78%).
Consolidated financial statements prepared by LifeStar Holding p.l.c. may be obtained from the Group’s registered office.
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Independent auditor’s report
To the shareholders of Lifestar Insurance p.l.c.
Report on the audit of the financial statements
Opinion
We have audited the financial statements of LifeStar Insurance p.l.c. (the “Company”) and of the Group of which it is the parent, which comprise the statements of financial position as at 31 December 2023, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company and the Group as at 31 December 2023, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU), and have been properly prepared in accordance with the requirements of the Companies Act, Cap. 386 (the “Act”) and the Insurance Business Act, 1998, Cap. 403 (the “Insurance Business Act”).
Our opinion is consistent with our additional report to the audit committee.
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 Auditor’s 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’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant
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Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In conducting our audit we have remained independent of the Company and the Group and have not provided any of the non-audit services prohibited by article 18A of the Accountancy Profession Act, Cap. 281. The non-audit services that we have provided to the Company and the Group during the year ended 31 December 2023 are disclosed in note 7 to the financial statements.
Emphasis of matter
We draw attention to note 29 of the financial statements, which makes reference to an investigation by the Malta Financial Services Authority relating to the Company’s business and operations. The outcome of the regulatory investigation cannot be predicted at this stage and there are many factors that may affect the range of outcomes, and the resulting impact, of these matters. Our opinion is not modified in respect of this matter.
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 and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. 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.
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Implementation of IFRS 17: Transition methodology, judgements and related estimates
Key audit matter
During the current financial year, the Group and the Company adopted for the first time IFRS 17 – Insurance Contracts which became effective for accounting periods beginning on or after 1 January 2023 and which replaced IFRS 4 – Insurance Contracts. The statement of financial position as at 1 January 2022 and the comparatives for the year ended 31 December 2022 have been restated in order to comply with the requirements of IFRS 17, and are presented in these financial statements.
The transition from IFRS 4 to IFRS 17 brought about significant changes to the recognition, measurement and presentation of reinsurance/insurance contract liabilities or assets, and requires significant judgement to estimate the impact on the financial position as at 1 January 2022 (the ‘transition date’) and 31 December 2022 (‘comparative period’).
The adoption of IFRS 17 has resulted in a significant increase in the Group and Company’s accumulated profit at the transition date (€ 6.55 million). This is primarily due to the derecognition of the present value of in force business and the establishment of the Contractual Service Margin (‘CSM’) on adopting IFRS 17. The CSM is the mechanism in IFRS 17 by which profits are deferred and amortised over the duration of a contract.
The methodology adopted by the Company to transition to IFRS 17 using the fair value approach, together with the judgements made and assumptions used, include:
•The approach applied to determine the fair value of the CSM on transition, including the selection of assumptions used in this calculation;
•The determination of IFRS 17 groups of contracts at which calculations will be undertaken, including determining the onerousness of contracts;
•The methodology to be applied in calculating IFRS 17 liabilities, including the Risk Adjustment (‘RA’) and CSM; and
•Variable Fee Approach eligibility for certain portfolios of contracts.
There is a risk that the CSM modelling is not appropriate or the agreed methodology has not been implemented correctly in the CSM model. There is
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also a risk of error within the accounting logic used to eventually populate the General Ledger.
There is a risk that the key judgements and estimates applied at transition and for 2022 restatement are not described in an appropriate level of detail for users of the financial statements to understand the decisions made by management.
How the key audit matter was addressed in our audit
The following are the main audit procedures which our specialists conducted to test the implementation of IFRS 17:
•We assessed the methodology applied against the IFRS 17 requirements and assessed the application of the methodology to the Company and its products, including Variable Fee Approach eligibility;
•We obtained an understanding of and challenged the methodology, judgements and assumptions used to arrive at the transition balance sheet and restated comparatives on adoption of IFRS 17, including the determination of the level of contract aggregation;
•We obtained an understanding of management’s approach to transition using the fair value approach, and challenged management’s assessment of impracticability of adopting the fully retrospective approach to measure the transition CSM;
•We tested the fair value calculations prepared by the Company at transition date and considered the valuation techniques applied in these calculations and that these were in compliance with the requirements of IFRS 17;
•We tested the CSM model’s compliance with IFRS 17 by inter alia examining a risk based sample of management’s test cases to demonstrate that the CSM model is materially compliant with the requirements of the standard for the measurement models used by the Company. We also tested the accounting logic and assessed its compliance with the requirements of the standard;
•We tested the inputs and outputs to/from the CSM model on a sample basis by inter alia performing testing of controls and substantive testing
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(including over key reconciliations) in relation to completeness and accuracy of data flows; and
•We tested the adequacy and compliance of the new quantitative and qualitative disclosures in the financial statements.
Based on the audit procedures performed, we consider the transition methodology, judgements and related estimates to be consistent with the explanations and evidence obtained.
Valuation of insurance contract liabilities
Key audit matter
IFRS 17 sets out the requirements that an entity should apply in accounting for insurance contracts it issues, reinsurance contracts it holds and investment contracts with discretionary participating features it issues.
As at 31 December 2023, the Group and the Company recorded insurance contract liabilities of € 105.2 million.
As explained in section 2.8 of the accounting policies, the Group and the Company’s insurance contract liabilities are measured as the total of fulfilment cash flows (comprising probability-weighted estimates of future cash flows and RA) and CSM, the determination of which required judgement and interpretation. This includes the selection of accounting policies and the use of complex methodologies. Management’s selection and application of appropriate methodologies requires significant professional judgement. The valuation also requires the determination of assumptions about future events, both internal and external to the business, giving rise to estimation uncertainty. The valuation of these liabilities is complex and sensitive to changes in assumptions.
We focused on this area due to its materiality and the subjectivity of the judgements made.
As part of our consideration of the entire set of assumptions, we focused particularly on expense assumptions and mortality and lapse assumptions as these are considered the most significant and judgemental. These are considered individually below.
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Valuation of insurance contract liabilities
Insurance contract liabilities are sensitive to the choice of assumptions made by the Company. There is a risk that the assumptions are not appropriate given the variability in experience and the relatively small size of the Company’s business, given the pool of data from which to assess experience.
In setting the assumptions, management utilise the Company's own historic experience, supplemented with additional external data in the calculation of the appropriate assumptions. In doing so there is a risk that the assumptions are not appropriate.
Valuation of insurance contract liabilities - expense assumptions
The valuation of insurance contract liabilities includes estimated future expenses that are expected to be incurred in the administration and maintenance of the existing policies to their maturity and includes an allowance for future inflation. The assumptions used require judgement, particularly with respect to the allocation of expenses to future maintenance, the estimation of policy volumes and future cost inflation.
IFRS 17 brought about certain changes to the treatment of expenses, requiring the Company to analyse expenses between acquisition costs, directly attributable expenses and non-attributable (i.e. out of scope) expenses. The valuation of the insurance contract liabilities is sensitive to changes in allocations between categories and changes in assumptions.
How the key audit matter was addressed in our audit
We performed the following audit procedures to test the valuation of insurance contract liabilities (including estimate of liabilities, RA and CSM), using our IFRS 17 and actuarial specialist team members:
• Tested the design and, where applicable, operating effectiveness of the controls in place over the determination of the insurance contract liabilities, including those relating to model inputs, model operation and extraction of results from the actuarial model;
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• Tested the design and, where applicable, the operating effectiveness of controls related to the completeness and accuracy of policyholder data used in the valuation of insurance contract liabilities;
• Tested the accuracy of the underlying data utilised for the purposes of measurement by reference to its source;
• Applied our industry knowledge and experience to assess the appropriateness of the methodology, model and assumptions used against recognised actuarial practices;
• Performed testing over the actuarial model calculations.
• Analysed the calculation methods for RA and CSM; and
• Ensured compliance of RA and CSM with IFRS17 standard.
In respect of the expense assumptions, we performed the following additional procedures:
• We have tested and challenged the appropriateness of the allocation between attributable and non-attributable expenses;
• We have reviewed, and where relevant, challenged the appropriateness of these cost allocations in the context of IFRS 17 requirements and actual costs incurred during the year and in the comparative period;
• We have assessed the impact of the current inflationary environment on the assumptions. In this respect, we understood and challenged the basis on which expenses are projected by reference to market observable data (inflation curve); and
• We have assessed the reasonableness of the policy volumes used in the expense calculation.
In respect of all the assumptions referred to above, we have assessed the assumptions’ appropriateness based on internal and external data (where available).
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Based on the work performed, we found the valuation of insurance contract liabilities (including the estimate, RA and CSM) to be consistent with the explanations and evidence obtained.
Fair value of investment properties
Key audit matter
The carrying amounts of the Group’s investment properties carried at fair value as at 31 December 2023 amounts to € 15.8 million. Management determined the fair values through internal assessments made by the directors by reference to external independent valuations made during the period. The fair value of investment properties was significant in our audit because the amounts are material to the financial statements of the Group.
The method used to determine the fair value of investment properties is fully described in note 14 to the financial statements.
How the key audit matter was addressed in our audit
We evaluated the suitability and appropriateness of the valuation methodology applied by management and reviewed and challenged the methodology applied and the underlying assumptions used by the independent valuation expert. We also assessed the competency and objectivity of the independent valuation experts appointed by the directors. We also communicated with management and those charged with governance and noted that they were able to provide satisfactory responses to our questions.
We also assessed the adequacy of the disclosures made in note 14 to the financial statements
relating to these properties.
We have no key observations to report, specific to this matter.
Recoverability of related party loans
Key audit matter
At balance sheet date, the Group had loans and receivables from the Company’s immediate parent company and other related companies amounting to €6.9 million and €5.2 million respectively. The accounting policy relating to
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impairment of these assets is described in section 9 of the accounting policies and the amounts are disclosed in note 17 to the financial statements. The loans and receivables are principally due from asset holding companies, which is why we have given additional attention to this area.
How the key audit matter was addressed in our audit
We agreed the loans and receivables to the agreements covering the amounts involved and we assessed the financial position of the companies from which the amounts are due, including the valuations of those companies’ underlying assets. As part of these procedures, we have also reviewed the loan repayment plans which the immediate parent company prepared and the underlying assumptions.
We also assessed the adequacy of the disclosures made in note 17 to the financial statements
relating to these properties.
We have no key observations to report, specific to this matter.
Valuation of investments
Key audit matter
The carrying amounts of the Group’s investments at 31 December 2023 amounted to € 96.98 million. These are described and disclosed in section 9 of the accounting policies and note 16 to the financial statements. These investments represent 67% of the total assets of the Group, and include a number of holdings which are unlisted and which therefore require a degree of judgement to be exercised when assessing their valuation.
How the key audit matter was addressed in our audit
We ensured that the value of listed investments is based on quoted prices obtained from independent sources.
For unlisted investments we evaluated the appropriateness of the valuation methodology applied by management and reviewed and challenged the methodology applied and the underlying assumptions. Where applicable we also assessed the values of any assets underlying the investments and challenged management’s assumptions and judgements made.
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Particular attention was given to the Group’s investments in three securitisation vehicles (SVs) registered in Luxembourg, which investments are backed by investments which the SVs made in a UK data centre and in a biomass project in Brazil. At 31 December 2023 the Company obtained confirmation of the values of its investments in the SVs which confirm that the Company's investments are not impaired.
We also communicated with management and those charged with governance and noted that they were able to provide satisfactory responses to our questions.
We also assessed the adequacy of the disclosures made in note 15 to the financial statements relating to these investments, and particularly the disclosures made in that note in relation to the Group’s investments in the SVs referred to above.
We have no key observations to report, specific to this matter.
Other information
The directors are responsible for the other information. The other information comprises (i) the Chairman and CEO Statement – LifeStar Insurance plc, (ii) the Managing Director’s Report - LifeStar Health Limited (iii) the Directors’ report and the Statement of directors’ responsibilities and (iv) the Corporate Governance – Statement of Compliance and (v) the Remuneration Report which we obtained prior to the date of this auditor’s report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information, including the Directors’ report.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above 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.
With respect to the Directors’ report, we also considered whether the Directors’ report includes the disclosures required by Article 177 of the Act, and in the case
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of the Remuneration report included in the Corporate Governance – Statement of Compliance, whether this has been prepared in accordance with Chapter 12 of the Capital Market Rules issued by the Malta Financial Services Authority (the “Capital Market Rules”).
Based on the work we have performed, in our opinion:
•The information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements, and the Directors’ report has been prepared in accordance with the Act, and
•The Remuneration report has been properly prepared in accordance with the requirements of the Capital Markets Rules.
In addition, in light of the knowledge and understanding of the Company and the Group and their environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Directors’ report and other information that we obtained prior to the date of this auditor’s report. We have nothing to report in this regard.
Responsibilities of the directors those charged with governance for the financial statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS as adopted by the EU and are properly prepared in accordance with the provisions of the Act and the Insurance Business Act, and for such 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.
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 relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.
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Auditor’s 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 auditor’s 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 the ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. 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.
-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 Group’s internal control.
-Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
-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 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 auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify
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our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s or the Group’s ability 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 evidence regarding the financial information of the entities or business activities within the Group to express and opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance 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 those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, 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 auditor’s 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 benefit of such communication.
Reports on other legal and regulatory requirements
Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6
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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 (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the Report and Consolidated Financial Statements of LifeStar Insurance p.l.c. for the year ended 31 December 2023, entirely prepared in a single electronic reporting format.
Responsibilities of the directors
The directors are responsible for the preparation of the Report and Consolidated Financial Statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.
Our responsibilities
Our responsibility is to obtain reasonable assurance about whether the Report and Consolidated Financial Statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.
Our procedures included:
-Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Report and Consolidated Financial Statements, in accordance with the requirements of the ESEF RTS.
-Obtaining the Annual Report and Consolidated Financial Statements and performing validations to determine whether the Annual Report and Consolidated Financial Statements have been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.
-Examining the information in the Annual Report and Consolidated Financial Statements to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.
-We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Opinion
In our opinion, the Annual Report and Consolidated Financial Statements for the year ended 31 December 2023 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.
Report on the Statement of Compliance with the Principles of Good Corporate Governance
The Capital Market Rules require the directors to prepare and include in their Annual Report a Statement of Compliance providing an explanation of the extent to which they have adopted the Code of Principles of Good Corporate Governance and the effective measures that they have taken to ensure compliance throughout the accounting period with those Principles.
The Capital Market Rules also require us, as the auditor of the Company, to include a report on the Statement of Compliance prepared by the directors.
We read the Statement of Compliance with the Code of Principles of Good Corporate Governance and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements included in the Annual Report. Our responsibilities do not extend to considering whether this statement is consistent with any other information included in the Annual Report.
We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance with the Code of Principles of Good Corporate Governance cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures.
In our opinion, the Corporate governance statement has been properly prepared in accordance with the requirements of the Capital Market Rules.
Other matters on which we are required to report by exception
We also have responsibilities
•under the Companies Act, Cap 386 to report to you if, in our opinion:
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-adequate accounting records have not been kept, or that returns adequate for our audit have not been received from branches not visited by us
-the financial statements are not in agreement with the accounting records and returns
-we have not received all the information and explanations we require for our audit
-certain disclosures of directors’ remuneration specified by law are not made in the financial statements, giving the required particulars in our report.
•in terms of Capital Market Rules to review the statement made by the Directors that the business is a going concern together with supporting assumptions or qualifications as necessary.
We have nothing to report to you in respect of these responsibilities.
Auditor tenure
We were first appointed as auditors of the Company and the Group on 9 October 2020. Our appointment has been renewed annually by a shareholders’ resolution representing a total period of uninterrupted engagement appointment of four years.
The engagement partner on the audit resulting in this independent auditor’s report is Mark Bugeja.
GRANT THORNTON
Fort Business Centre
Triq L-Intornjatur, Zone 1
Central Business District
Birkirkara CBD 1050
Malta
Mark Bugeja
Partner
8 July 2024
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T:+356 21 342 342
E:info@lifestarinsurance.com
W:www.lifestarinsurance.com
A:LifeStar Building, Testaferrata Street, Ta’ Xbiex, XBX 1403, Malta
LifeStar Insurance plc (C29086) is authorised under the Insurance Business Act, Cap 403 and is regulated by the MFSA.