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FIRST INS Interim / Quarterly Report 2020

Dec 28, 2020

52208_rns_2020-12-28_367c3b7c-5893-438a-8cb7-c4ad66d143b0.pdf

Interim / Quarterly Report

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Stock ID: 2852

The First Insurance Co., Ltd.

Financial Statements and Independent Auditor’s Review Report For the Third Quarter of 2020 and 2019

Address: 11F, No. 54, Section 1, Zhongxiao East Road, Taipei City TEL: (02)23913271

  • 1 -

§TABLE OF CONTENTS§

§TABLE OF CONTENTS§
ITEM
PAGE
1.
Cover page
1
2.
Table of contents
2
3.
Independent auditor’s review report
3
4.
Balance Sheet
4
5.
Statement of comprehensive income
5~6
6.
Statement of changes in equity
7
7.
Cash flow statement
8~9
8.
Notes to financial statements
(1)
Corporate history
10
(2)
Financial statement approval date and
procedures
10
(3)
Application of new and amended
standards and interpretations
10~13
(4)
Summary of significant accounting
policies
13~15
(5)
Sources of uncertainty to significant
accounting judgments, estimates, and
assumptions
15~16
(6)
Notes to major accounts
16~51, 53~77
(7)
Related party transactions
51~53
(8)
Pledged assets
-
(9)
Major contingent liabilities and
unrecognized contractual commitments
53
(10)
Losses from major disasters
53
(11)
Other matters
53
(12)
Major post-balance sheet events
53
(13)
Information on foreign
currency-denominated financial assets
and liabilities and exchange rate
53
(14)
Other disclosures
1. Information related to significant
transactions
78
2. Information related to invested
businesses
78
3. Information relating to investments
and business activities in the
Mainland China
78
4. Dominant shareholders
78
(15)
Segment information
78		 SERIAL
NUMBER OF
NOTES TO
FINANCIAL
STATEMENTS		 SERIAL
NUMBER OF
-
-
-
-
-
-
-
1
2
3
4
5
6-38
31
-
32
33
34
35
36
39
39
39
39
40
  • 2 -

Independent Auditor’s Review Report

To stakeholders of The First Insurance Co., Ltd.:

Foreword

We have audited the balance sheet of The First Insurance Co., Ltd. as at September 30, 2020 and 2019; the statement of comprehensive income, statement of changes in equity, and cash flow statement for periods July 1 to September 30, 2020 and 2019, and January 1 to September 30, 2020 and 2019; and the accompanying footnotes (including summary of major accounting policies. It is the responsibility of the management to prepare and ensure fair presentation of financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Insurance Enterprises, and the version of IAS 34 - “Interim Financial Reporting” approved and published by the Financial Supervisory Commission. Our responsibility as auditor is to form a conclusion based on our review.

Scope

We, the auditors, have performed the review in accordance with Statement on Auditing Standards No. 65 - “Financial Statement Review.” The procedures executed in our review of financial statements include inquiry (mainly with employees responsible for financial and accounting affairs), analysis and other review-related processes. The scope of financial statement review is significantly smaller than a financial statement audit, therefore we may not be able to detect all material issues through the steps we have taken, and are unable to provide an opinion. Conclusion

In our opinion, all material disclosures of the financial statements mentioned above were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Insurance Enterprises and the version of IAS 34 - “Interim Financial Reporting” approved by the Financial Supervisory Commission, and were free of non-compliant disclosures or omissions that would otherwise compromise fair view of the financial position of The First Insurance Co., Ltd. as of September 30, 2020 and 2019, and business performance and cash flow for the periods July 1 to September 30, 2020 and 2019, and January 1 to September 30, 2020 and 2019.

Deloitte Taiwan CPA: Alice Huang

CPA: Alice Huang CPA: Wan-Yi Liao Approval reference of the Securities and Approval reference of the Financial Futures Bureau Supervisory Commission Tai-Cai-Zheng-VI-Zi No. 0920131587 Jin-Guan-Zheng-Shen-Zi No. 1010028123

November 11, 2020

  • 3 -

The First Insurance Co., Ltd. Balance Sheet

As of September 30, 2020, December 31, 2019, and September 30, 2019

Unit: NTD thousands

Code Assets September 30, 2
(Reviewed)		 020 December 31, 20
(Audited)		 19 September 30, 2
(Reviewed)		 019
Amount % Amount
$ 1,860,014
139,251
278,527
45,607
1,645,093
1,529,333
2,663,153
3,185,743
943,248
2,269,819
620,038
4,320
7,203
52,582
562,858
50,025
$ 15,856,814
$ -
110,162
436,418
178,688
49,329
4,139
7,911,750
170,179
92,934
15,114
76,840
9,045,553
3,011,638
1,246,749
1,740,117
405,734
3,392,600
407,023
6,811,261
$ 15,856,814		 % Amount %
11000
12100
12200
12500
14110
14145
14180
14190
14200
15000
16000
16700
17300
17800
18300
18700
1XXXX
Code		 Cash (Note 6)
Notes receivable - Net (Notes 12 and 38)
Premiums receivable - net (Notes 12, 31 and 38)
Other receivables (Note 12)
Financial assets at fair value through profit and loss (Note 7)
Financial assets carried at cost after amortization (Notes 9 and 10)
Other financial assets (Notes 6 and 11)
Financial assets at fair value through other comprehensive income
(Notes 8 and 10)
Investment properties (Note 13)
Reinsurance contract assets (Notes 12, 14 and 38)
Property, plant, and equipment (Note 15)
Right-of-use asset (Note 16)
Intangible assets (Note 17)
Deferred income tax assets (Note 4)
Guarantee deposits paid (Notes 8 and 18)
Other assets - Others (Note 19)
TOTAL ASSETS
Liabilities and equity		 $ 1,676,052
140,484
267,280
44,981
2,301,585
1,759,019
2,658,910
2,395,663
899,987
2,049,148
662,339
4,274
40,477
50,443
621,656
26,546
$ 15,598,844
$ 1,786
99,552
409,513
140,703
4,884
4,320
7,958,142
151,689
92,934
14,530
88,303
8,966,356
3,011,638
1,362,943
1,738,274
358,067
3,459,284
161,566
6,632,488
$ 15,598,844		 11
1
2
-
15
11
17
16
6
13
4
-
-
-
4
-
100
-
1
3
1
-
-
51
1
-
-
-
57
20
9
11
2
22
1
43
100		 12
1
2
-
10
10
17
20
6
14
4
-
-
-
4
-
100
-
1
3
1
-
-
50
1
1
-
-
57
19
8
11
2
21
3
43
100		 $ 1,530,658
137,734
345,814
52,588
2,210,909
1,529,753
2,660,798
2,573,280
944,982
2,646,237
616,798
3,253
6,233
49,994
560,167
23,767
$ 15,892,965
$ 1,729
105,448
461,586
144,082
45,505
3,181
8,265,145
169,627
93,572
15,114
81,927
9,386,916
3,011,638
1,246,749
1,532,665
446,981
3,226,395
268,016
6,506,049
$ 15,892,965		 10
1
2
-
14
10
17
16
6
17
4
-
-
-
3
-
100
-
1
3
1
-
-
52
1
1
-
-
59
19
8
9
3
20
2
41
100
21200
21400
21500
21600
21700
23800
24000
27100
28000
25300
25900
2XXXX
31000
33100
33200
33300
33000
34900
3XXXX		 Insurance claims and benefits payable (Note 38)
Commission payable (Note 38)
Reinsurance accounts payable (Note 38)
Other payables (Note 20)
Current income tax liabilities (Note 4)
Lease liabilities (Note 16)
Insurance liabilities (Notes 4, 5, 21 and 38)
Provision for employee benefits (Notes 4 and 22)
Deferred income tax liabilities (Note 4)
Guarantee deposits received
Other liabilities - Others (Note 23)
Total liabilities
Share capital (Note 24)
Retained earnings (Note 24)
Legal reserve
Special reserve
Undistributed earnings
Total retained earnings
Other equity items (Note 24)
Total equity
Total liabilities and equity

The accompanying notes are an integral part of the financial statements.

Chairman: C. H. Lee

Manager: Chu-Minn Leu

Head of Accounting: Fei-Fen Hsiao

  • 4 -

The First Insurance Co., Ltd.

Comprehensive Income Statement

For the periods from July 1 to September 30, 2020 and 2019, and from January 1 to September 30, 2020 and 2019 (Reviewed only; not audited in accordance with generally accepted audit principles)

Unit: NTD thousands, except EPS which is in dollars

July 1 to September 30, July 1 to September 30, July 1 to September 30, July 1 to September 30, July 1 to September 30, July 1 to September 30, January 1 to September January 1 to September January 1 to September January 1 to September 30, January 1 to September January 1 to September January 1 to September January 1 to September 30,
2020 2019 2020 2019
Code Amount % Amount % Amount % Amount %
Revenue
41110 Written premiums (Notes 31
and 38) $ 1,612,097 102 $ 1,547,104 103 $ 5,301,395 122 $ 5,233,975 116
41120 Reinsurance premiums (Note
38) 107,941 7 110,167 7 306,781 7 311,462 7
41100 Premium revenues 1,720,038 109 1,657,271 110 5,608,176 129 5,545,437 123
51100 Less: Reinsurance expenses
(Note 38) ( 368,664 ) ( 23 ) ( 442,426 ) ( 29 ) ( 1,368,473 ) ( 32 ) ( 1,491,829 ) ( 33 )
51310 Less: Net change in unearned
premium reserve 34,526 2 126,882 8 ( 197,600) ( 4) ( 56,972) ( 1)
41130 Retained earned premiums
(Note 38) 1,385,900 88 1,341,727 89 4,042,103 93 3,996,636 89
41300 Reinsurance commissions
received (Note 38) 62,923 4 72,040 5 214,364 5 220,588 5
41400 Service fee 6,308 - 6,494 - 19,547 1 19,560 -
Net investment gains
41510 Interest income (Note 25) 21,677 1 21,078 2 69,529 2 74,089 2
41521 Gains on financial assets
or liabilities at fair
value through profit
and loss 8,282 1 ( 40,190 ) ( 3 ) ( 136,697 ) ( 3 ) 44,138 1
41527 Realized gains/losses on
financial assets at fair
value through other
comprehensive income
(Note 8(1)) 87,757 6 92,357 6 100,807 2 92,357 2
41550 Gain (loss) on exchange -
investment (Note 25) ( 10,653 ) ( 1 ) ( 3,231 ) - ( 17,283 ) ( 1 ) 2,843 -
41570 Gains (losses) on
investment property
(Note 25) 13,056 1 14,052 1 39,300 1 42,186 1
41585 Expected credit
impairment loss and
reversal gain on
investment ( 1,272) - ( 44) - 953 - ( 4,838) -
41500 Total net investment
gains 118,847 8 84,022 6 56,609 1 250,775 6
41830 Gain on exchange -
non-investment (Note 25) - - 817 - - - 2,775 -
41890 Other operating revenues -
Others 50 - 396 - 50 - 571 -
41800 Other operating revenues 50 - 1,213 - 50 - 3,346 -
41000 Total operating revenues 1,574,028 100 1,505,496 100 4,332,673 100 4,490,905 100
Operating Cost
Retained claims and benefits
(Notes 31 and 38)
51200 Insurance claim and
benefit payments 975,247 62 1,068,789 71 2,942,037 68 3,248,936 72
41200 Less: Claims recovered
from reinsurers ( 227,337) ( 14) ( 321,769) ( 21) ( 728,912) ( 17) ( 997,127) ( 22)
51260 Total retained
claims and
benefits paid 747,910 48 747,020 50 2,213,125 51 2,251,809 50
Net change in other liabilities
(Note 38)
51320 Net change in claim
reserves 26,870 2 20,602 1 ( 7,420 ) - ( 95,152 ) ( 2 )
51340 Net change in special
claim reserves 5,888 - ( 5,185 ) - 21,295 1 ( 1,857 ) -
51350 Net change in premium
deficiency reserves 3,792 - ( 5,526) - 8,129 - 3,968 -
51300 Total net change in
other liabilities 36,550 2 9,891 1 22,004 1 ( 93,041 ) ( 2 )

(Continued next page)

  • 5 -

(Continued from previous page)

July 1 to September July 1 to September July 1 to September 30, July 1 to September July 1 to September July 1 to September 30, January 1 to September January 1 to September January 1 to September 30, January 1 to September January 1 to September January 1 to September 30,
2020 2019 2020 2019
Code Amount % Amount % Amount % Amount %
51510 Commission expenses (Note
38) $ 237,181 15 $ 226,169 15 $ 708,367 16 $ 709,493 16
51600 Service charges (Note 38) 33,770 2 32,691 2 100,343 2 103,735 2
Other operating costs
51810 Contribution to insurance
stabilization fund
(Note 38) 3,228 - 3,097 - 10,613 - 10,473 -
51830 Interest expenses - - 1 - 17 - 23 -
51850 Loss on exchange -
non-investment (Note
25) 3,569 - - - 4,887 - - -
51890 Other operating costs -
Others 298 - - - 501 - - -
51800 Total other
operating costs 7,095 - 3,098 - 16,018 - 10,496 -
51000 Total operating costs 1,062,506 67 1,018,869 68 3,059,857 70 2,982,492 66
60000 Gross profit 511,522 33 486,627 32 1,272,816 30 1,508,413 34
Operating expenses (Notes 25 and
31)
58100 Selling expenses 331,854 21 298,997 20 960,786 22 908,211 20
58200 Administrative expenses 22,615 2 25,235 1 67,453 2 74,746 2
58300 Staff training expenses 666 - 1,038 - 1,746 - 2,641 -
58000 Total operating expenses 355,135 23 325,270 21 1,029,985 24 985,598 22
61000 TOTAL OPERATING INCOME 156,387 10 161,357 11 242,831 6 522,815 12
Non-operating income and
expenses
59500 Recovery of bad and overdue
debts 8 - - - 8 - - -
59920 Sundry income - - - - 694 - - -
59990 Other non-operating expenses
(Note 16) ( 29) - ( 24) - ( 80) - ( 60) -
59000 Total non-operating
income and expenses ( 21) - ( 24) - 622 - ( 60) -
62000 Pre-tax profit from continuing
operations 156,366 10 161,333 11 243,453 6 522,755 12
63000 Income tax expenses (Notes 4 and
26) 12,321 1 21,842 2 55,642 1 78,760 2
66000 Current net income 144,045 9 139,491 9 187,811 5 443,995 10
Other comprehensive income (Note
24)
83100 Items not reclassified into
profit and loss
83190 Gains/losses on valuation
of equity instruments
at fair value through
other comprehensive
income ( 10,043 ) ( 1 ) ( 33,830 ) ( 2 ) ( 122,990 ) ( 3 ) 223,299 5
83200 Items likely to be reclassified
into profit and loss
83290 Valuation gains/losses on
debt instruments at fair
value through other
comprehensive income 12,539 1 136 - 45,523 1 17,415 -
83000 Other comprehensive
income - current (net,
after tax) 2,496 - ( 33,694) ( 2) ( 77,467) ( 2) 240,714 5
85000 Total comprehensive income -
current $ 146,541 9 $ 105,797 7 $ 110,344 3 $ 684,709 15
Earnings per share (Note 27)
97500 Basic $ 0.48 $ 0.46 $ 0.62 $ 1.47
98500 Diluted $ 0.48 $ 0.46 $ 0.62 $ 1.47

The accompanying notes are an integral part of the financial statements.

Chairman: C. H. Lee

Manager: Chu-Minn Leu

Head of Accounting: Fei-Fen Hsiao

  • 6 -

The First Insurance Co., Ltd. Statement of Changes in Equity From January 1 to September 30, 2020 and 2019

(Reviewed only; not audited in accordance with generally accepted audit principles)

Code
A1
Balance as of January 1, 2019
Appropriation and distribution of earnings:
B1
Legal reserve
B3
Special reserve
B5
Cash dividend
D1
Net income for January 1 to September 30, 2019
D3
Other comprehensive income for January 1 to September 30, 2019
D5
Total comprehensive income for January 1 to September 30, 2019
Z1
Balance as at September 30, 2019
A1
Balance as of January 1, 2020
Appropriation and distribution of earnings:
B1
Legal reserve
B3
Special reserve
B5
Cash dividend
D1
Net income for January 1 to September 30, 2020
D3
Other comprehensive income for January 1 to September 30, 2020
D5
Total comprehensive income for January 1 to September 30, 2020
Q1
Disposal of equity instruments at fair value through other
comprehensive income (Note 8(1))
Z1
Balance as at September 30, 2020		 Share capital (Note
24)
$ 3,011,638
-
-
-
-
-
-
$ 3,011,638
$ 3,011,638
-
-
-
-
-
-
-
$ 3,011,638		 Retained earnings (Note24)
Legal reserve
Special reserve
Undistributed
earnings
$ 1,156,391
$ 1,530,505
$ 243,074
90,358
-
(
90,358 )
-
2,160
(
2,160 )
-
-
(
147,570 )
-
-
443,995
-
-
-
-
-
443,995
$ 1,246,749
$ 1,532,665
$ 446,981
$ 1,246,749
$ 1,740,117
$ 405,734
116,194
-
(
116,194 )
-
(
1,843 )
1,843
-
-
(
289,117 )
-
-
187,811
-
-
-
-
-
187,811
-
-
167,990
$ 1,362,943
$ 1,738,274
$ 358,067		 Retained earnings (Note24)
Legal reserve
Special reserve
Undistributed
earnings
$ 1,156,391
$ 1,530,505
$ 243,074
90,358
-
(
90,358 )
-
2,160
(
2,160 )
-
-
(
147,570 )
-
-
443,995
-
-
-
-
-
443,995
$ 1,246,749
$ 1,532,665
$ 446,981
$ 1,246,749
$ 1,740,117
$ 405,734
116,194
-
(
116,194 )
-
(
1,843 )
1,843
-
-
(
289,117 )
-
-
187,811
-
-
-
-
-
187,811
-
-
167,990
$ 1,362,943
$ 1,738,274
$ 358,067		 Other Equity
Unrealized
gains/losses on
financial assets at fair
value through other
comprehensive
income
(Note24)
$ 27,302
-
-
-
-
240,714
240,714
$ 268,016
$ 407,023
-
-
-
-
(
77,467)
(
77,467)
(
167,990)
$ 161,566		 (in NT$ 1,000)
Totalequity
Legal reserve
$ 1,156,391
90,358
-
-
-
-
-
$ 1,246,749
$ 1,246,749
116,194
-
-
-
-
-
-
$ 1,362,943		 Special reserve
$ 1,530,505
-
2,160
-
-
-
-
$ 1,532,665
$ 1,740,117
-
(
1,843 )
-
-
-
-
-
$ 1,738,274
(
(
(		 $ 5,968,910
-
-
(
147,570 )
443,995
240,714
684,709
$ 6,506,049
$ 6,811,261
-
-
(
289,117 )
187,811
(
77,467)
110,344
-
$ 6,632,488

Chairman: C. H. Lee

The accompanying notes are an integral part of the financial statements. Manager: Chu-Minn Leu Head of Accounting: Fei-Fen Hsiao

  • 7 -

The First Insurance Co., Ltd. Cash Flow Statement

From January 1 to September 30, 2020 and 2019

(Reviewed only; not audited in accordance with generally accepted audit principles)

(in NT$ 1,000)

Code
Cash flow from operating activities
A10000
Pre-tax profit for the current period
A20010
Income, expenses and losses
A20100
Depreciation
A20200
Amortization
A20900
Interest expenses
A21200
Interest income
A21300
Dividend income
A21400
Net change of various reserves -
current
A21830
Expected credit impairment loss
(reversal gain) on investment
A24100
Unrealized gain (loss) on foreign
exchange
A50000
Change in assets/liabilities related to
operating activities
A51110
Notes receivable
A51120
Premiums receivable
A51130
Other receivables
A51140
Gains on financial assets or
liabilities at fair value through
profit and loss
A51141
Financial assets at fair value
through other comprehensive
income
A51145
Debt
instrument
investments
measured
at
cost
after
amortization
A51160
Other financial assets
A51170
Reinsurance Contracts Assets
A51190
Guarantee deposits paid
A51990
Other assets
A52120
Claims payable
A52140
Commission payable
A52150
Reinsurance accounts payable
A52160
Other payables		 January 1 to
September 30,
2020
$ 243,453
18,922
7,058
97
(
69,529)
(
110,529)
46,392
(
953)
4,349
(
1,233)
11,247
289
(
656,492)
648,802
(
230,000)
4,243
220,671
2,377
(
2,164)
1,786
(
10,610)
(
26,905)
(
37,985 )		 January 1 to
September 30,
2019
$ 522,755
15,264
5,352
83
(
74,089)
(
127,887)
(
321,953)
4,838
(
675)
25,421
49,632
133,698
1,456,970
(
1,672,186 )
(
197,521 )
(
86,121)
261,119
4,605
(
2,216 )
(
2,716)
(
1,733 )
(
26,235)
(
25,801 )

(Continued next page)

  • 8 -

(Continued from previous page)

Code
A52200
Provisions for employee benefits
A52240
Guarantee deposits received
A52990
Other liabilities
A33000
Cash inflow (outflow) from operating
activities
A33100
Interests received
A33200
Dividends received
A33300
Interests paid
A33500
Income tax paid
AAAA
Net cash inflow from operating
activities
Cash flow from investing activities
B02700
Acquisition of property, plant and
equipment
B04500
Acquisition of intangible assets
BBBB
Net cash outflow from investing
activities
Cash flow from financing activities
C04020
Repayment of lease principal
C04500
Cash dividends paid
CCCC
Net cash outflow from financing
activities
DDDD
Exchange rate effects on cash
EEEE
Decrease in cash for the current period
E00100
Opening cash balance
E00200
Closing cash balance		 January 1 to
September 30,
2020
($ 18,490)
(
584)
11,463
55,675
73,769
110,529
(
97)
(
97,948)
141,928
(
16,015)
(
14,689)
(
30,704)
(
1,720)
(
289,117)
(
290,837)
(
4,349)
(
183,962)
1,860,014
$ 1,676,052		 January 1 to
September 30,
2019
($ 8,257 )
-
(
9,987)
(
77,640)
59,908
127,887
(
83)
(
56,100)
53,972
(
1,502 )
(
630)
(
2,132)
(
1,185)
(
147,570)
(
148,755)
675
(
96,240)
1,626,898
$ 1,530,658

The accompanying notes are an integral part of the financial statements.

Chairman: C. H. Lee Manager: Chu-Minn Leu Head of Accounting: Fei-Fen Hsiao

  • 9 -

The First Insurance Co., Ltd. Notes to financial statements From January 1 to September 30, 2020 and 2019

(Reviewed only; not audited in accordance with generally accepted audit principles) (Unless otherwise specified, all amounts are presented in NTD thousands)

1. Corporate history

The First Insurance Co., Ltd. (the Company) was founded in September 1962. It is primarily involved in the offering of non-life insurance products, particularly fire insurance, cargo insurance and automobile insurance. The Company has branches established in Taichung, Kaohsiung, Tainan, Taoyuan and New Taipei City.

On November 28, 2000, the Company received approval from Securities and Futures Commission, Ministry of Finance, to list for trading on Taiwan Stock Exchange Corporation.

This financial report is presented using the Company’s functional currency (NTD). 2. Financial statement approval date and procedures This financial report was passed during the board of directors meeting dated November 11, 2020.

  1. Adoption of new and amended standards and interpretations

  2. (1) First-time adoption of International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and interpretations (IFRIC) and announcements (SIC) thereof approved by the Financial Supervisory Commission (“FSC”) (collectively referred to as “IFRSs” below)

Adoption of FSC-approved IFRSs did not result in any material change to the Company’s accounting policies.

  • (2) IFRSs published by IASB but yet to be approved by FSC New/Amended/Modified Standards and

Effective date of IASB announcement (Note 1) January 1, 2022 (Note 2) January 1, 2022 (Note 3)

Interpretations

“Improvements for years 2018-2020” Amendments to IFRS 3 regarding “Updating a Reference to the Conceptual Framework” Amendments to IFRS 4 regarding “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 - “Interest Rate Benchmark Reform – Phase II”

Effective from the announcement date January 1, 2021

Amendments to IFRS 10 and IAS 28 - “Sale or Undetermined Contribution of Assets between an Investor and its Associate or Joint Venture”

(Continued next page)

  • 10 -

(Continued from previous page)

New/Amended/Modified Standards and Effective date of IASB Interpretations announcement (Note 1) IFRS 17 - “Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IAS 1 - “Classification of Liabilities January 1, 2023 as Current or Non-current” Amendments to IAS 16 - “Property, Plant and January 1, 2022 (Note 4) Equipment: Proceeds before Intended Use” Amendments to IAS 37 - “Onerous Contracts - Cost January 1, 2022 (Note 5) of Fulfilling a Contract”

  • Note 1: Unless otherwise specified, all new/amended/modified standards and interpretations above shall take effect from the financial year that begins after the specified date.

  • Note 2: The IFRS 9 amendment will apply to exchange or modification of financial liability that occur in financial years starting on and after January 1, 2022. Amendments to IAS 41 - “Agriculture” will apply to fair value assessments for financial years starting on and after January 1, 2022. Amendments to IFRS 1 - “First-time Adoption of IFRSs” will apply retrospectively in financial years starting on and after January 1, 2022.

  • Note 3: These amendments are applicable to business combinations that take place in financial years starting on and after January 1, 2022.

  • Note 4: These amendments will apply to property, plant and equipment that reach the management’s intended location and state on and after January 1, 2021.

  • Note 5: These amendments will apply to all contracts with outstanding obligations as of January 1, 2022.

IFRS 17 - “Insurance Contracts” and amendments

Accounting treatment of insurance contracts stated under IFRS 17 will supersede IFRS 4 - “Insurance Contracts.” Key amendments to IFRS 17 are as follows:

Level of aggregation for insurance contracts

IFRS 17 requires the Company to identify portfolios of insurance contracts. A portfolio refers to contracts that are subject to similar risks and management. Contracts within a specific product line would be expected to share similar risks and hence would be expected to be in the same portfolio if they are managed together. Each portfolio of insurance contracts issued by the Company shall be divided into a minimum of:

  • (a) A group of contracts that are onerous at initial recognition;

  • (b) A group of contracts that, at initial recognition, have no significant possibility of becoming onerous subsequently; and

  • (c) A group of the remaining contracts in the portfolio.

The Company is not permitted to include contracts issued more than one year apart in the same group, and shall apply appropriate recognition and measurement rules of IFRS 17 for the portfolios it has determined.

Recognition

The Company shall recognize a group of insurance contracts it issues from the earliest of the following:

  • (a) The beginning of coverage start date for the group of contracts;

  • 11 -

  • (b) The date when the first payment from a policyholder in the group becomes due; and

  • (c) For a group of onerous contracts, when the group becomes onerous. Measurement at initial recognition

On initial recognition, the Company shall measure a group of insurance contracts at the total of fulfillment cash flows and contractual service margin. Fulfillment cash flow (“FCF”) comprises future cash flow estimates, adjustments for time value of money (“TVM”) and financial risks associated with future cash flows, and risk adjustments for non-financial risk. Contractual service margin represents unearned profit from a group of insurance contracts that the Company will recognize as it provides services in the future. Unless the group of contracts is onerous, contractual service margin is measured upon initial recognition of a group of insurance contracts at an amount that results in no income or expenses arising from: (a) Initial recognition of FCF;

  • (b) All cash flows originating from the group of contracts as of the given day; and

  • (c) De-recognition of the following items on the initial date of recognition:

  • (i) All cash flow assets acquired from insurance; and

  • (ii) All other assets or liabilities previously recognized on cash flows from the group of contracts.

Subsequent measurement

On subsequent measurement, the carrying amount of a group of insurance contracts at the end of each reporting period shall be the book value sum of the liability for remaining coverage and liability for incurred claims. Liability for remaining coverage includes FCF related to future services, the CSM, and FCF related to past service allocated to the group at that date. If a group of insurance contracts becomes onerous (or more onerous), the loss shall be recognized in profit or loss immediately.

Onerous contracts

An insurance contract is onerous at initial recognition if the amount of FCF allocated to insurance contract plus cash flows previously received and recognized on insurance plus all cash flows arising from the contract at initial recognition result in a net outflow. In which case, the Company shall recognize a loss in profit or loss for the net outflow, so that carrying amount of liability for the group of contracts equals the FCF and that CSM of the group is zero. The CSM cannot increase and no revenue can be recognized, until the onerous amount previously recognized has been reversed in profit or loss.

Premium allocation approach

The Company may simplify measurement for a group of insurance contracts using the Premium Allocation Approach (PAA) if any of the following conditions is met at the inception of the group of insurance contracts:

  • (a) The Company reasonably expects that the size of liability for remaining coverage generated from PAA to be a reasonable approximation of the general model, or

  • (b) The coverage period of each contract in the group is one year or less. Where, at the inception of the group, the Company expects significant variances

  • in the FCF before a claim is incurred that would affect the measurement of liabilities for remaining coverage, such contracts are not eligible for condition (a).

  • When using PAA, the liability for remaining coverage is calculated as:

  • (a) Premiums collected at initial recognition;

  • (b) Less cash flows acquired from all insurance on the given day; and

  • 12 -

  • (c) Plus or minus de-recognition of the following items on the date of initial recognition:

  • (i) All cash flow assets acquired from insurance; and

  • (ii) All other assets or liabilities previously recognized on cash flows from the group of contracts.

Subsequently, carrying amount of the liability shall be adjusted for premiums received, amortization of cash flows acquired on insurance, minus the amount recognized as insurance revenue for services rendered in that period, and minus all investment components paid or transferred to the liability for incurred claims.

Investment contracts with a discretionary participation feature

An investment contract with a discretionary participation feature (DPF) is a financial instrument that does not include a transfer of significant insurance risk. These contracts are subject to IFRS 17 only if the Company issues investment contracts with DPF and insurance contracts at the same time.

Modification and derecognition

If the terms of an insurance contract are modified, the Company shall de-recognize the original contract and recognize the modified contract as a new contract if there is a substantive modification that meets any of the specified criteria.

The Company shall de-recognize an insurance contract when it is extinguished or if any substantive modification is made. Transition

In general, the Company shall fully adopt IFRS 17 on a retrospective basis. However, where it is impracticable to do so, the Company shall have the option of using either the modified retrospective approach or the fair value approach.

Under the modified retrospective approach, the Company shall utilize reasonable and supportable information and maximize the use of information that would have been used to apply a full retrospective approach, but need only use information available without undue cost or effort. If reasonable and supportable information is unavailable, the Company shall apply the fair value approach instead.

Under the fair value approach, the Company determines CSM at the transition date as the difference between the fair value of a group of insurance contracts at that date and the FCF measured at that date.

Apart from the impacts mentioned above, the Company continues to evaluate how amendments of the above standards and interpretations will affect its financial position and business performance as of the publication date of the financial statements. Outcomes of these assessments will be disclosed once they are concluded.

  1. Summary of significant accounting policies (1) Statement of compliance

This financial report has been prepared in accordance with Regulations Governing the Preparation of Financial Reports by Insurance Enterprises and FSC-approved IAS 34 - “Interim Financial Reporting.” This financial report does not contain all IFRSs disclosures required in a full-year report.

  • (2) Basis of preparation

This financial report has been prepared based on historical cost, except for financial instruments carried at fair value.

Fair value measurement can be rated on a level of 1 to 3 depending on the ease of observation and significance of inputs:

  1. Level 1 input: Refers to quotations that can be obtained from an active market (unadjusted) on the measurement date for asset or liability of equivalent nature.

  2. 13 -

  3. Level 2 input: Refers to inputs that can be observed directly (i.e. price) or indirectly (i.e. established from price) for an asset or liability, other than Level 1 quotations.

  4. Level 3 input: Refers to inputs that cannot be observed for an asset or liability.

(3) Other significant accounting policies

Apart from the explanations presented below, please refer to the 2019 financial report for a summary of significant accounting policies.

  1. Retirement benefits - defined benefit plan

Interim retirement costs are calculated from the beginning until the end of the interim period using the actuarial pension cost rate determined at the end of the previous year, and adjusted for major market changes, plan modifications, settlements and other one-time events that took place in the current period. 2. Income tax

Income tax expense represents the sum of current income tax and deferred income tax. Income taxes for the interim period are assessed by determining the tax rate applicable to expected total annual earnings, and applying the tax rate to interim pre-tax profit.

  1. Insurance liabilities

The Company provides insurance liabilities for various insurance contracts according to “Regulations Governing Reserve Provisioning by Insurance Enterprises,” “Regulations for the Management of the Various Reserves for Compulsory Automobile Liability Insurance,” “Enforcement Rules for the Risk Spreading Mechanism of Residential Earthquake Insurance” and “Regulations for the Management of the Various Reserves for Nuclear Risks Insurance by Non-life Insurance Enterprises.” All insurance liabilities have been verified by FSC-certified actuaries. The basis of provision for various insurance liabilities is explained below:

  • (1) Unearned premium reserve

The Company makes provision of unearned premium reserve for unexpired contracts and existing insurance risks by calculating unexpired risks of each insurance contract. The Company adopts the 24th Method and other methods to provide for and recover unearned premium reserves.

  • (2) Claim reserves

The Company makes claim reserves using actuarial methods based on past experience and payments. The Company makes two different types of claim reserve: Reported but unpaid claims and Unreported claims. The amount of reserve for Reported but unpaid claims is estimated on a case-by-case basis and provided for different insurance categories.

  • (3) Special claim reserves

There are two types of special claim reserve: “Special claim reserves for major incidents” and “Special claim reserves for change of risk.” Provisions made before January 1, 2011 will continue to be presented as liabilities, whereas new provisions made on and after January 1, 2011 net of income taxes are presented as special reserve under other equity items. Starting from January 1, 2011, offsets or recoveries can be made to special claim reserves that are presented as liabilities. Once the liability has been depleted, the remainder of the

  • 14 -

offset/recovery net of income taxes can be charged against special claim reserves that are presented under other equity items. A. Special claim reserves for major incidents

Special claim reserves for major incidents are provided using the percentages specified by the competent authority.

Any occurrence of government-announced major incident that causes individual insurance companies to pay retained claims amounting to NT$30 million across all insurance categories, and the entire non-life insurance industry to pay claims amounting to NT$2 billion or above across all insurance categories, may be offset against special claim reserves for major incidents.

Insurance companies that have made special claim reserves for major incidents for more than 15 years may devise a reserve recovery system with the involvement of certified actuaries, and implement with the acknowledgment of the competent authority.

B. Special claim reserves for change of risk

If the balance of actual claim after offsetting against special claim reserves for major incidents of a particular insurance category is lower than expected claims, the Company shall provide special claim reserves for change of risk on the difference according to rules of the competent authority.

If the balance of actual claim after offsetting against special claim reserves for major incidents of a particular insurance category is higher than expected claims, the Company may offset the difference against special claim reserves for change of risk. If there are insufficient special claim reserves for change of risk to offset a particular insurance category, the Company may offset the excess against special claim reserves for change of risk of other insurance categories. The insurance category and amount of offset shall comply with the rules and are subject to acknowledgment of the competent authority.

The Company shall recover amounts of special claim reserves for change of risk that exceed the requirements imposed by the competent authority per insurance category.

(4) Deficiency reserve

The Company assesses future possible claims and expenses for each category of unexpired contracts and existing insurance risks. If the estimated claims and expenses exceed unearned premium reserves plus expected premium revenues, a deficiency reserve shall be provided on the difference for that insurance category.

  • (5) Liabilities adequacy reserve

With regards to contracts that are subject to liability adequacy test under IFRSs 4, the Company performs adequacy tests for recognized insurance liabilities by estimating future cash flows based on information available on each balance sheet date. Liability adequacy reserves are provided for any shortfalls revealed by the test.

  1. Sources of uncertainty to significant accounting judgments, estimates, and assumptions When applying accounting policies, the management is required to make judgments, estimates, and assumptions based on historical experience or other relevant

  2. 15 -

factors in situations where information cannot be easily obtained from available sources. The actual outcome may differ from initial estimates.

The management will continually review its estimates and basic assumptions. If a revision of accounting estimate affects only the current period, the effect shall be recognized only for the current period. If a revision of accounting estimate affects current and future periods, the effect shall also be recognized for current and future periods.

Insurance liabilities from insurance contracts

Claim reserves arising from insurance contracts are estimated on each balance sheet date according to insurance regulations. These amounts are verified by FSC-certified actuaries, but due to the estimations involved, the actual amount of liability may be higher or lower than the amount estimated.

6.

Cash

Cash
Petty cash and cash on hand
Check and current deposit		 September 30,
2020
$ 710
1,675,342
$ 1,676,052		 December 31,
2019
$ 357
1,859,657
$ 1,860,014		 September 30,
2019
$ 1,200
1,529,458
$ 1,530,658

Foreign currency deposits are placed with domestic banks. As of September 30, 2020, December 31, 2019, and September 30, 2019, the Company held NT$2,658,910,000, NT$2,663,153,000 and NT$2,660,798,000 of time deposit, respectively, that had initial maturity of more than 3 months and were presented as other financial assets (refer to Note 11).

7. Financial assets at fair value through profit and loss

financial assets (refer to Note 11).
Financial assets at fair value through profit and loss		 financial assets (refer to Note 11).
Financial assets at fair value through profit and loss		 financial assets (refer to Note 11).
Financial assets at fair value through profit and loss
September 30,
2020
December 31,
2019
Mandatory at fair value
throughout profit and loss
Non-derivative financial
assets
TWSE/TPEx listed
shares
$ 611,500
$ 735,535
Beneficiary
certificates
1,445,295
434,142
Securitized
beneficiary
certificates
194,703
424,851
Bank debentures
50,087
50,565
Subtotal
$ 2,301,585
$ 1,645,093
Financial assets at fair value through other comprehensive income
September 30,
2020
December 31,
2019
Investment in equity
instruments
$ 1,904,647
$ 2,676,438
Investment in debt
instruments
491,016
509,305
$ 2,395,663
$ 3,185,743		 September 30,
2019
$ 1,101,060
980,227
79,554
50,068
$ 2,210,909
September 30,
2019

Investment in equity
instruments
Investment in debt
instruments
September 30,
2020
$ 1,904,647
491,016
$ 2,395,663
$ 2,065,838
507,442
$ 2,573,280

8. Financial assets at fair value through other comprehensive income

  • 16 -

(1)

Investment in equity instruments

Domestic investments
TWSE/TPEx listed
shares
Unlisted shares		 September 30,
2020
$ 1,056,619
848,028
$ 1,904,647		 December 31,
2019
$ 1,730,675
945,763
$ 2,676,438		 September 30,
2019		 September 30,
2019
$ 1,135,299
930,539
$ 2,065,838

The Company held the abovementioned listed and non-listed common shares as strategic investments and not for trading purposes, and therefore opted to account them at fair value through other comprehensive income.

For the purpose of risk diversification, the Company made a series of adjustments to its investment position between January 1 and September 30, 2020. Listed common shares with a total fair value of NT$1,263,850,000 were sold during the process, and as a result, NT$167,990,000 of unrealized gains on financial assets at fair value through other comprehensive income previously presented as other equity item were realized and charged to retained earnings in accordance with IFRS9.

The Company recognized NT$87,757,000, NT$92,357,000, NT$100,807,000, and NT$92,357,000 of cash dividend income and acquired NT$46,125,000, NT$5,347,000, NT$46,125,000, and NT$5,347,000 of stock dividend for the periods January 1 to September 30, 2020 and 2019, and January 1 to September 30, 2020 and 2019, respectively.

(2) Investment in debt instruments

September 30, December 31, September 30,
2020 2019 2019
Domestic investments
Government bonds $ 1,070,052 $ 1,027,166 $ 1,022,966
Less: Amount placed
as guarantee deposit (
579,036)		 (
517,861)		 (
515,524)
$ 491,016 $ 509,305 $ 507,442
Information on government bond investments as at the balance sheet date:
September 30, December 31, September 30,
2020 2019 2019
Face value of investment $ 909,000 $ 909,000 $ 909,000
Coupon interest rate 1.125%~5.000% 1.125%~5.000% 1.125%~5.000%
Average maturity 7.34 years 8.09 years 8.34 years

Please refer to Note 10 for information relating to credit risk management and impairment assessment of debt instruments at fair value through other comprehensive income.

Please refer to Note 18 for the amount of government bonds placed as guarantee bond for insurance business as of September 30, 2020, December 31, 2019, and September 30, 2019.

  • 17 -

9. Financial assets carried at cost after amortization

Domestic investments
Bank debenture (1)
Corporate bond (2)(3)
Subtotal
Less: loss provisions		 September 30,
2020
$ 1,444,891
330,000
1,774,891
(
15,872)
$ 1,759,019		 December 31,
2019
$ 1,516,154
30,000
1,546,154
(
16,821)
$ 1,529,333		 September 30,
2019		 September 30,
2019
( ( ( $ 1,516,577
30,000
1,546,577

16,824)
$ 1,529,753
  • (1) Information on bank debenture investments as of the balance sheet date:
Domestic investments
Face value of investment
Effective interest rate
Average maturity		 September 30,
2020
$ 1,440,000
1.250%~2.600%
3.59 years		 December 31,
2019
$ 1,510,000
1.550%~3.000%
3.82 years		 September 30,
2019
$ 1,510,000
1.550%~3.000%
4.07 years

  • (2) In November 2016, the Company purchased NT$30,000,000 of cumulative subordinated corporate bonds issued by Mercuries Life Insurance at face value. The bonds offered a yield of 3.7%.

  • (3) In June, July, and August 2020, the Company purchased NT$100,000,000 of subordinated corporate bonds issued by CTBC Holding, NT$100,000,000 of ordinary corporate bonds issued by SERCOMM, and NT$100,000,000 of ordinary common bonds issued by Taiwan Cogeneration at yields of 1.05%, 1.00%, and 1.00%, respectively.

  • (4) Please refer to Note 10 for information relating to credit risk management and impairment assessment of financial assets carried at cost after amortization.

  • Credit risk management of debt instrument investments Debt instrument investments are classified as financial assets at fair value through

other comprehensive income and financial assets carried at cost after amortization: September 30, 2020

September 30, 2020
Cost
Loss provisions
Cost after amortization
Fair value adjustment
December 31, 2019
Cost
Loss provisions
Cost after amortization
Fair value adjustment		 At fair value through
other comprehensive
income
$ 985,896
(
254)
985,642
84,410
$ 1,070,052
At fair value through
other comprehensive
income
$ 988,541
(
258)
988,283
38,883
$ 1,027,166		 At cost after
amortization
$ 1,774,891

15,872)
$ 1,759,019
At cost after
amortization
$ 1,546,154

16,821)
$ 1,529,333		 Total
( ( $ 2,760,787

16,126)
2,744,661
84,410
$ 2,829,071
Total
( ( ( $ 2,534,695

17,079)
2,517,616
38,883
$ 2,556,499
  • 18 -

September 30, 2019

September 30, 2019
11.
12.
(1)		 Cost
Loss provisions
Cost after amortization
Fair value adjustment
Please refer to paragraph
financial risk management for
instruments.
Other financial assets
Time deposit with initial
maturity of more than 3
months
- NTD
- Foreign currency
Interest rate range - NTD
Interest rate range - Foreign
currency
Receivables
Details:
Note receivable-net
At cost after amortization
Arising from business
activities
Arising
from
non-business
activities
Less: loss provisions
Premiums receivable-net
At cost after amortization
Total book value
Less: loss provisions		 At fair value
through other
comprehensive
income
At cost after
amortization
Total
$ 989,424
$ 1,546,577
$ 2,536,001
(
258)
(
16,824)
(
17,082)
989,166
$ 1,529,753
2,518,919
33,800
33,800
$ 1,022,966
$ 2,552,719
2. Credit risk in Note 30 - (4) Purpose and policy of
the Company’s credit risk management policy on debt
September 30,
2020
December 31,
2019
September 30,
2019
$ 2,074,000
$ 2,084,000
$ 2,084,000
584,910
579,153
576,798
$ 2,658,910
$ 2,663,153
$ 2,660,798
0.10%~1.04%
0.13%~1.04%
0.13%~1.04%
0.98%~2.15%
2.10%~3.20%
2.80%~3.70%
September 30,
2020
December 31,
2019
September 30,
2019
$ 143,889
$ 140,767
$ 140,473
200
2,057
795
(
3,605)
(
3,573)
(
3,534)
$ 140,484
$ 139,251
$ 137,734
$ 307,020
$ 318,833
$ 386,478
(
39,740)
(
40,306)
(
40,664)
$ 267,280
$ 278,527
$ 345,814		 Total
$ 2,084,000
576,798
$ 2,660,798
0.13%~1.04%
2.80%~3.70%
September 30,
2019
(
(		 (
(		 $ 140,473
795

3,534)
$ 137,734
$ 386,478

40,664)
$ 345,814
  • Please refer to paragraph 2. Credit risk in Note 30 (4) Purpose and policy of financial risk management for the Company’s credit risk management policy on debt instruments.

(Continued next page)

  • 19 -

(Continued from previous page)

Other receivables
At cost after amortization
Interest and security
dividends
receivable
Rent receivable
Others
Less: loss provisions
Claims recoverable from
reinsurers
At cost after amortization
Total book value
Less: loss provisions
Reinsurance
accounts
receivable
At cost after amortization
Total book value
Less: loss provisions		 September 30,
2020
$ 39,058
4,189
3,978
(
2,244)
$ 44,981
$ 133,211
(
736)
$ 132,475
$ 204,117
(
2,382)
$ 201,735		 December 31,
2019
$ 39,395
2,176
4,265
(
229)
$ 45,607
$ 167,092
(
1,010)
$ 166,082
$ 219,176
(
3,589)
$ 215,587		 September 30,
2019		 September 30,
2019
(
(
(		 (
(
(		 (
(
(		 $ 46,672
2,165
4,015

264)
$ 52,588
$ 227,889

3,038)
$ 224,851
$ 261,260

1,207)
$ 260,053

Claims recoverable from reinsurers and reinsurance accounts receivable are presented under reinsurance contract assets. Please refer to Notes 14 and 38(1) for details on insurance contract receivables.

(2) Notes, premiums and other receivables

The Company evaluates customers’ credit risk based on historical transaction records and customers’ financial position. The Company monitors credit risk exposure and dealings with counterparties on an ongoing basis.

The Company makes loss provisions based on counterparty’s previous payment records, financial position, aging analysis and estimation of the unrecoverable amount. Recoverability of receivables and loans is assessed regularly on an item-by-item basis according to “Regulation on Asset Valuation, Overdue Collection and Loan Loss Provisioning by Insurance Companies” and rules concerning expected credit loss stated in IFRS 9; the higher of the two amounts derived above is determined as loss provision.

If there is evidence to suggest that the counterparty is undergoing severe financial crisis and the recoverable amount cannot be reasonably estimated, such as the case of liquidation, the Company will directly offset loss provisions against accounts receivable. In which case, the Company will continue collection efforts on the receivables, and any amounts recovered will be recognized through profit and loss.

The Company takes into account customer’s default history and current financial position and industry prospect. Since the Company’s credit loss history

  • 20 -

showed no significant difference in loss pattern across customer groups, the loss rate is not further distinguished between customer groups, and the expected credit loss rate is simply determined as a function of historical average loss rate and historical default rate.

Notes receivable

default rate.
Notes receivable
Not yet
matured/redeemed/collected
Returned notes
Total
Premiums receivable
0~90 days
91 days and above
Total		 September 30,
2020
$ 144,072
17
$ 144,089
September 30,
2020
$ 74,833
232,187
$ 307,020		 December 31,
2019
$ 142,818
6
$ 142,824
December 31,
2019
$ 256,064
62,769
$ 318,833		 September 30,
2019
$ 141,265
3
$ 141,268
September 30,
2019
$ 230,448
156,030
$ 386,478

Aging analysis for premiums receivable was prepared based on contract effective date. Other receivables

effective date.
ther receivables
0~90 days
91 days and above
Total		 September 30,
2020
$ 44,529
2,696
$ 47,225		 December 31,
2019
$ 45,836
-
$ 45,836		 September 30,
2019
$ 52,852
-
$ 52,852

Aging analysis for other receivables was prepared based on bookkeeping date. Claims recoverable from reinsurers and reinsurance accounts receivable

0~270 days
271 days and above
Total		 September 30,
2020
$ 319,380
17,948
$ 337,328		 December 31,
2019
$ 385,319
949
$ 386,268		 September 30,
2019		 September 30,
2019
$ 487,865
1,284
$ 489,149

Aging analysis for reinsurance accounts receivable was prepared based on bookkeeping date.

  • 21 -

(3) Change in loss provisions: September 30, 2020 Notes receivable

Change in loss provisions:
September 30, 2020
Notes receivable		 Change in loss provisions:
September 30, 2020
Notes receivable		 Change in loss provisions:
September 30, 2020
Notes receivable
Not yet
matured/redeemed/
collected
Returned notes
Loss ratio
0.5%~50%
100%
Total book value
$ 144,072
$ 17
Loss provisions
(
3,588)
(
17)
(
Cost after amortization
$ 140,484
$ -
Premiums receivable
0~90 days
91 days and
above
Loss ratio
0.5%~1%
2%~100%
Total book value
$ 74,833
$ 232,187
Loss provisions
(
374)
(
39,366)
(
Cost after amortization
$ 74,459
$ 192,821
Other receivables
0~90 days
91 days and
above
Loss ratio
0.5%
2%~100%
Total book value
$ 44,529
$ 2,696
Loss provisions
(
223)
(
2,021)
(
Cost after amortization
$ 44,306
$ 675
Claims recoverable from reinsurers and reinsurance accounts receivable
0~270 days
271 days and
above
Loss ratio
0.5%~1.0%
2%~100%
Total book value
$ 319,380
$ 17,948
Loss provisions
(
2,628)
(
490)
(
Cost after amortization
$ 316,752
$ 17,458
December 31, 2019
Notes receivable
Not yet
matured/redeemed/
collected
Returned notes
Loss ratio
2.5%~50%
100%
Total book value
$ 142,818
$ 6
Loss provisions
(
3,567)
(
6)
(
Cost after amortization
$ 139,251
$ -		 Total
( $ 144,089

3,605)
$ 140,484
Total
( $ 307,020

39,740)
$ 267,280
Total
$ 47,225

2,244)
$ 44,981
Total
Loss ratio
Total book value
Loss provisions
Cost after amortization
December 31, 2019
Notes receivable
Loss ratio
Total book value
Loss provisions
Cost after amortization		 271 days and
above
2%~100%
$ 17,948
(
490)
$ 17,458
Returned notes
100%
$ 6
(
6)
$ -
( $ 337,328

3,118)
$ 334,210
Total
( ( ( $ 142,824

3,573)
$ 139,251
  • 22 -
Premiums receivable
0~90 days
91 days and
above
Total
Loss ratio
0.5%
2%~100%
Total book value
$ 256,064
$ 62,769
$ 318,833
Loss provisions
(
1,280)
(
39,026)
(
40,306)
Cost after amortization
$ 254,784
$ 23,743
$ 278,527
Other receivables
0~90 days
91 days and
above
Total
Loss ratio
0.5%
2%~100%
Total book value
$ 45,836
$ -
$ 45,836
Loss provisions
(
229)
-
(
229)
Cost after amortization
$ 45,607
$ -
$ 45,607
Claims recoverable from reinsurers and reinsurance accounts receivable
0~270 days
271 days and
above
Total
Loss ratio
0.5%~1.5%
2%~100%
Total book value
$ 385,319
$ 949
$ 386,268
Loss provisions
(
4,485)
(
114)
(
4,599)
Cost after amortization
$ 380,834
$ 835
$ 381,669
September 30, 2019
Notes receivable
Not yet
matured/redeem
ed/collected
Returned notes
Total
Loss ratio
2.50%~50%
100%
Total book value
$ 141,265
$ 3
$ 141,268
Loss provisions
(
3,531)
(
3)
(
3,534)
Cost after amortization
$ 137,734
$ -
$ 137,734
Premiums receivable
0~90 days
91 days and
above
Total
Loss ratio
0.5%
2%~100%
Total book value
$ 230,448
$ 156,030
$ 386,478
Loss provisions
(
1,152)
(
39,512)
(
40,664)
Cost after amortization
$ 229,296
$ 116,518
$ 345,814
Other receivables
0~90 days
91 days and
above
Total
Loss ratio
0.5%
2%~100%
Total book value
$ 52,852
$ -
$ 52,852
Loss provisions
(
264)
-
(
264)
Cost after amortization
$ 52,588
$ -
$ 52,588		 0~90 days 91 days and
above		 Total
( (
91		 (
$
$
Loss ratio
Total book value
Loss provisions
Cost after amortization
September 30, 2019
Notes receivable
Loss ratio
Total book value
Loss provisions
Cost after amortization
Premiums receivable
Loss ratio
Total book value
Loss provisions
Cost after amortization
Other receivables
Loss ratio
Total book value
Loss provisions
Cost after amortization		 0~270 days
0.5%~1.5%
$ 385,319
(
4,485)
$ 380,834
Not yet
matured/redeem
ed/collected
2.50%~50%
$ 141,265
(
3,531)
$ 137,734
0~90 days
0.5%
$ 230,448
(
1,152)
$ 229,296
0~90 days
0.5%
$ 52,852
(
264)
$ 52,588		 271 days and
above
2%~100%
$ 949
(
114)
$ 835
Returned notes
100%
$ 3
(
3)
$ -
91 days and
above
2%~100%
$ 156,030
(
39,512)
$ 116,518
91 days and
above
2%~100%
$ -
-
$ -
(
(
( (
( (
  • 23 -

Claims recoverable from reinsurers and reinsurance accounts receivable

Loss ratio
Total book value
Loss provisions
Cost after amortization		 0~270 days
0.5%~1%
$ 487,865
(
4,204)
$ 483,661		 271 days and
above
2%~100%
$ 1,284
(
41)
$ 1,243		 Total
( ( ( $ 489,149
4,245)
$ 484,904

Change in loss provisions by account category:

January 1 to September 30, 2020

January1 to September January1 to September 30,2020
Opening balance
Plus: Losses/expenses
provided in the current
period
Less: losses/expenses
reversed in the
current period
Closing balance
Opening balance
Plus: Losses/expenses
provided in the current
period
Less: losses/expenses
reversed in the
current period
Closing balance		 Notes
receivable
$ 3,573
32
-
$ 3,605		 Premiums
receivable
Other
receivables
$ 40,306
$ 229
340
2,022
(
906)
(
7)
$ 39,740
$ 2,244
January1 to September		 Claims
recoverable
from
reinsurers
$ 1,010
-
(
274)
$ 736
30,2019		 Reinsuranc
e accounts
receivable
( ( $ 3,589
375
1,582)
$ 2,382
Notes
receivable
$ 4,186
-
(
652)
$ 3,534		 Premiums
receivable
$ 40,516
1,113
(
965)
$ 40,664		 Other
receivables
$ 853
-
(
589)
$ 264		 Claims
recoverable
from
reinsurers
$ 1,803
1,235
-
$ 3,038		 Reinsuranc
e accounts
receivable
( ( ( ( $ 1,349
219
361)
$ 1,207

Explanation to overdue receivables and loss provisions:

  1. Balances of notes receivable, premiums receivable, and other receivables as of September 30, 2020 included NT$17,000, NT$232,187,000, and NT$2,696,000 that were overdue, for which the Company had made loss provisions totaling NT$17,000, NT$39,366,000, and NT$2,021,000, respectively. Reinsurance accounts receivable has been assessed for impairment and unrecoverable amounts. The balance includes NT$17,948,000 of overdue receivables, for which a loss provision of NT$490,000 has been made.

  2. Balances of notes receivable and premiums receivable as of December 31, 2019 included NT$6,000 and NT$62,769,000 that were overdue, for which the Company had made loss provisions totaling NT$6,000 and NT$39,026,000, respectively. Reinsurance accounts receivable has been assessed for impairment and unrecoverable amounts. The balance includes NT$949,000 of overdue receivables, for which a loss provision of NT$114,000 has been made.

  3. 24 -

  4. Balances of notes receivable and premiums receivable as at September 30, 2019 included NT$3,000 and NT$156,030,000 that were overdue, for which the Company had made loss provisions totaling NT$3,000 and NT$39,512,000, respectively. Reinsurance accounts receivable has been assessed for impairment and unrecoverable amounts. The balance includes NT$1,284,000 of overdue receivables, for which a loss provision of NT$41,000 has been made.

13. Investment property

made.
Investment property
Cost
Balance as of January 1, 2020
Reclassification
Balance as at September 30,
2020
Increase from revaluation
Balance as of January 1, 2020
Balance as at September 30,
2020
Accumulated depreciation
Balance as of January 1, 2020
Depreciation
Reclassification
Balance as at September 30,
2020
Cumulative impairment
Balance as of January 1, 2020
Balance as at September 30,
2020
Net balance as of September
30, 2020
Net balance as of December
31, 2019 and January 1,
2020
Cost
Balance as of January 1, 2019
Balance as at September 30,
2019		 January1 to September 30,2020
Land
Buildings
Total
$ 609,119
$ 364,598
$ 973,717

22,659)
(
22,660)
(
45,319)
586,460
341,938
928,398
163,480
-
163,480
163,480
-
163,480
-
172,251
172,251
-
4,820
4,820
-
(
6,878)
(
6,878)
-
170,193
170,193
15,526
6,172
21,698
15,526
6,172
21,698
$ 734,414
$ 165,573
$ 899,987
$ 757,073
$ 186,175
$ 943,248
January1 to September 30,2019		 Total
(
Land
$ 609,119
609,119		 Buildings
$ 364,598
364,598		 Total
$973,717
973,717

(Continued next page)

  • 25 -

(Continued from previous page)

Increase from revaluation
Balance as of January 1, 2019
Balance as at September 30,
2019
Accumulated depreciation
Balance as of January 1, 2019
Depreciation
Balance as at September 30,
2019
Cumulative impairment
Balance as of January 1, 2019
Balance as at September 30,
2019
Net balance as of September
30, 2019		 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019
Land
$ 163,480
163,480
-
-
-
15,526
15,526
$ 757,073		 Buildings
$ -
-
165,313
5,204
170,517
6,172
6,172
$ 187,909		 Total
$ 163,480
163,480
165,313
5,204
170,517
21,698
21,698
$944,982

Some investment properties became self-occupied between January 1 and September 30, 2020, and were reclassified to property, plant and equipment as a result.

Depreciation expenses are provided on investment property on a straight-line basis over the number of useful years shown as follows:

Main structure 55 to 60 years
Renovation of exterior 41 years
wall
Renovation of interior 10 years
Other constructions 10 years

The Company’s investment property as of September 30, 2020, December 31, 2019, and September 30, 2019 amounted to NT$2,694,278,000, NT$2,747,898,000, and NT$2,673,437,000, respectively. Fair value was determined by the management based on actual transaction prices of properties near the investments in the one year dating back from the financial reporting date, as published on the website of the Department of Land Administration, Ministry of the Interior. The management had decided to use level 3 fair value input, and take the lowest or a range of prices transacted near the invested properties.

Investment properties are leased for 1 to 10 years. All operating lease agreements contain clauses that enable the lessor to adjust rent according to the market rate if the lessee chooses to renew lease at the end of the lease tenor. The lessees are not entitled any privileges to purchase the leased properties at the end of the lease period.

The outbreak of COVID-19 has severely impacted economic activities in 2020, and the Company agreed to reduce rent by a total of NT$1,732,000 between January and September 2020 on some leases. Based on assessment, the above reduction does not pose any material impact on the Company’s ability to operate as a going concern, give rise to any additional asset impairment, or raise financing risk.

The sum of lease payments collectible on investment properties leased out through operating lease as of September 30, 2020, December 31, 2019, and September 30, 2019 is as follows:

  • 26 -
Year 1
Year 2
Year 3
Year 4
Year 5		 September 30,
2020
$ 68,331
55,243
36,659
5,575
600
$ 166,408		 December 31,
2019
$ 68,795
55,960
42,345
20,347
4,333
$ 191,780		 September 30,
2019		 September 30,
2019
$ 64,116
47,091
34,251
23,368
2,684
$ 171,510
  1. Reinsurance contract assets (1) Details:
insurance contract assets
Details:
Claims recoverable from
reinsurers
Reinsurance
accounts
receivable
Reinsurance reserve assets		 September 30,
2020
$ 132,475
201,735
1,714,938
$ 2,049,148		 December 31,
2019
$ 166,082
215,587
1,888,150
$ 2,269,819		 September 30,
2019
$ 224,851
260,053
2,161,333
$ 2,646,237

With regards to ceded insurance as of September 30, 2020, the Company was required to disclose ceded claim reserve for reported and unpaid liability totaling NT$28,000 on the sum of marine hull insurance ceded to Tugu Insurance Company Ltd., a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

For the sum of accident insurance ceded to Trust International Insurance and Reinsurance Company B.S.C.(C).Trust Re Labuan Branch, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$71,000 and ceded claim reserve for reported and unpaid liability totaling NT$3,000.

In addition, the Company was required to make provisions for substandard reinsurance reserve of NT$102,000 (including NT$71,000 of claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months, and NT$31,000 of ceded claim reserve for reported and unpaid liability) when preparing regulatory reports; however, this NT$102,000 of additional reserve and liability does not affect the Company’s financial statements.

With regards to ceded insurance as of December 31, 2019, the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$59,000 and ceded claim reserve for reported and unpaid liability totaling NT$85,000 on the sum of marine hull insurance ceded to Tugu Insurance Company Ltd., a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

For the sum of commercial fire insurance ceded to ASIA CAPITAL REINSURANCE GROUP PTE LTD, a reinsurer that did not conform with the credit grading

  • 27 -

requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose substandard reinsurance premium expenses totaling NT$694,000.

For the sum of accident insurance ceded to Trust International Insurance and Reinsurance Company B.S.C.(C).Trust Re Labuan Branch, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$117,000 and ceded claim reserve for reported and unpaid liability totaling NT$38,000.

In addition, the Company was required to make provisions for substandard reinsurance reserve of NT$646,000 (including NT$347,000 of ceded unearned premium reserve, NT$176,000 of claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months, and NT$123,000 of ceded claim reserve for reported and unpaid liability) when preparing regulatory reports; however, this NT$646,000 of additional reserve and liability does not affect the Company’s financial statements.

With regards to ceded insurance as of September 30, 2019, the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$61,000 and ceded claim reserve for reported and unpaid liability totaling NT$212,000 on the sum of marine hull insurance ceded to Tugu Insurance Company Ltd., a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

For the sum of accident insurance ceded to Trust International Insurance and Reinsurance Company B.S.C.(C).Trust Re Labuan Branch, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$1,848,000 and ceded claim reserve for reported and unpaid liability totaling NT$30,000.

In addition, the Company was required to make provisions for substandard reinsurance reserve of NT$2,151,000 (including NT$1,909,000 of claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months, and NT$242,000 of ceded claim reserve for reported and unpaid liability) when preparing regulatory reports; however, this NT$2,151,000 of additional reserve and liability does not affect the Company’s financial statements.

(2) Please refer to Notes 12 and 38(1) for details and changes in the amount of claims recoverable from reinsurers, reinsurance accounts receivable, and related loss provisions presented above.

  • 28 -
(3)
Details of reinsurance reserve assets:
September 30,
2020
Ceded unearned premium
reserve
$ 1,003,624
Ceded claim reserve
701,530
Deficiency
reserve
for
ceded coverage
9,784
$ 1,714,938		 December 31,
2019
$ 1,077,452
803,134
7,564
$ 1,888,150		 September 30,
2019		 September 30,
2019
$ 1,244,948
907,252
9,133
$ 2,161,333

Please refer to Items (2), (3) and (5) in Note 38 - Disclosure of insurance contract-related information for more details on reinsurance reserve assets presented above.

15. Property, plant, and equipment

Cost
Balance as of January 1,
2020
Increase - current period
Decrease - current period
Reclassification
Balance as at September
30, 2020
Increase from
revaluation
Balance as of January 1,
2020
Balance as at September
30, 2020
Accumulated
depreciation
Balance as of January 1,
2020
Depreciation
Decrease - current period
Reclassification
Balance as at September
30, 2020
Cumulative impairment
Balance as of January 1,
2020
Balance as at September
30, 2020
Net balance as of
September 30, 2020
Net balance as of
December 31, 2019
and January 1, 2020		 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020
Proprietary
land
$ 308,401
-
-
22,659
331,060
123,786
123,786
-
-
-
-
-
4,774
4,774
$ 450,072
$ 427,413		 Buildings
$ 337,281
379
-
22,660
360,320
-
-
160,788
5,191
-
6,878
172,857
1,898
1,898
$ 185,565
$ 174,595		 Sundry
equipment
$ 52,309
15,636
(
352)
-
67,593
-
-
34,279
6,964
(
352)
-
40,891
-
-
$ 26,702
$ 18,030		 Total
$ 697,991
16,015
(
352)
45,319
758,973
123,786
123,786
195,067
12,155
(
352)
6,878
213,748
6,672
6,672
$ 662,339
$ 620,038
  • 29 -
Cost
Balance as of January 1,
2019
Increase - current period
Balance as at September
30, 2019
Increase from
revaluation
Balance as of January 1,
2019
Balance as at September
30, 2019
Accumulated
depreciation
Balance as of January 1,
2019
Depreciation
Balance as at September
30, 2019
Cumulative impairment
Balance as of January 1,
2019
Balance as at September
30, 2019
Net balance as of
September 30, 2019		 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019
Proprietary
land
$ 308,401
-
308,401
123,786
123,786
-
-
-
4,774
4,774
$ 427,413		 Buildings
$ 337,142
139
337,281
-
-
154,126
4,996
159,122
1,898
1,898
$ 176,261		 Sundry
equipment
$ 47,133
1,363
48,496
-
-
31,421
3,951
35,372
-
-
$ 13,124		 Total
$ 692,676
1,502
694,178
123,786
123,786
185,547
8,947
194,494
6,672
6,672
$ 616,798

Please refer to Note 13 for explanation on reclassification from investment property.

Depreciation expenses are provided on property, plant and equipment on a straight-line basis over the number of useful years shown as follows: Buildings

Buildings
Main structure
- Confined masonry 35 years
- Steel-reinforced concrete 50 to 62 years
Renovation of exterior wall 41 years
Renovation of interior 8 to 19 years
Other constructions 10 to 25 years
Others 15 to 30 years
Sundry equipment 3 to 15 years

Property, plant, and equipment for periods from January 1 to September 30, 2020 and 2019, exclude capitalized interest.

The Company’s property, plant, and equipment showed no sign of impairment as of September 30, 2020, December 31, 2019, and September 30, 2019.

  • 30 -

  • Lease arrangements (1) Right-of-use asset

(1) Lease arrangements
Right-of-use asset
September 30, December 31, September 30,
2020 2019 2019
Book value of right-of-use
assets
Buildings $ 2,107 $ 3,452 $ 2,225
Transportation
equipment 2,167 868 1,028
$ 4,274 $ 4,320 $ 3,253
July 1 to July 1 to January 1 to January 1 to
September 30, September 30,
September 30,		 September 30,
2020 2019 2020 2019
Additional right-of-use asset $ 1,901 $ 1,659
Depreciation expense on
right-of-use assets
Buildings $ 447 $ 289 $ 1,345 $ 635
Transportation
equipment 284 159 602 478
$ 731 $ 448 $ 1,947 $ 1,113
(2) Lease liability
September 30, December 31, September 30,
2020 2019 2019
Book value of lease
liabilities $ 4,320 $ 4,139 $ 3,181
Discount rate range for lease liabilities:
September 30, December 31, September 30,
2020 2019 2019
Buildings 2.65% 2.65% 2.65%
Transportation equipment 2.65% 2.65% 2.65%
July 1 to July 1 to January 1 to January 1 to
September 30, September 30, September 30, September 30,
2020 2019 2020 2019
Interest expense on lease
liabilities
Buildings $ 16 $ 16 $ 57 $ 34
Transportation
equipment 13 8 23 26
$ 29 $ 24 $ 80 $ 60
(3) Other lease information
July 1 to July 1 to January 1 to January 1 to
September 30, September 30, September 30, September 30,
2020 2019 2020 2019
Short-term rent expense $ 890 $ 1,045 $ 2,754 $ 3,352
Total cash (outflow)
from lease ($ 4,554) ($ 4,597)
  • 31 -

For buildings and transportation equipment rented through short-term lease that conform with relevant criteria, the Company chooses to adopt the exemption rule and forgo recognition of right-of-use asset and lease liabilities.

17. Intangible assets

Intangible assets
Computer software
January 1 to
September 30,2020
January 1 to
September 30,2019
Cost
Opening balance
$ 27,805
$ 28,379
Additions
14,689
630
Disposals
-
(
3,593)
Reclassification from prepayment
for equipment purchase
25,643
-
Closing balance
68,137
25,416
Accumulated depreciation
Opening balance
20,602
17,424
Amortization expenses
7,058
5,352
Disposals
-
(
3,593)
Closing balance
27,660
19,183
Closing net balance
$ 40,477
$ 6,233
The above computer software is amortized on a straight-line basis over 3~5 years.
The Company’s intangible assets showed no sign of impairment as of September
30, 2020, December 31, 2019 and September 30, 2019.
Guarantee deposits paid
September 30,
2020
December 31,
2019
September 30,
2019
Guarantee deposit for
insurance business -
Government bonds
$ 579,036
$ 517,861
$ 515,524
Others
42,620
44,997
44,643
$ 621,656
$ 562,858
$ 560,167		 Computer software
January 1 to
September 30,2019
$ 515,524
44,643
$ 560,167

The above computer software is amortized on a straight-line basis over 3~5 years. The Company’s intangible assets showed no sign of impairment as of September 30, 2020, December 31, 2019 and September 30, 2019.

18. Guarantee deposits paid

According to Articles 141 and 142 of the Insurance Act, insurance enterprises are required to place guarantee deposits amounting to 15% of paid-up capital with the treasury. This guarantee deposit will not be refunded unless the insurance enterprise ceases business operations and completes liquidation. The Company had placed the guarantee deposit in the form of government bonds.

19. Other assets - others

Other assets-others
Prepayments
Prepaid equipment purchase
Others		 September 30,
2020
$ 5,777
6,257
14,512
$ 26,546		 December 31,
2019
$ 6,371
29,073
14,581
$ 50,025		 September 30,
2019
$ 6,292
16,480
995
$ 23,767
  • 32 -
20.
21.		 Other payables
Salary and bonus payable
Share settlements payable
Leave encashment payable
Pension payable
Others
Insurance liabilities
Unearned premium reserve
Claim reserve
Special reserve
Deficiency reserve		 September 30,
2020
$ 61,059
4,328
4,453
1,680
69,183
$ 140,703
September 30,
2020
$ 3,850,431
2,382,209
1,690,860
34,642
$ 7,958,142		 December 31,
2019
$ 84,563
16,147
415
1,670
75,893
$ 178,688
December 31,
2019
$ 3,726,659
2,491,233
1,669,565
24,293
$ 7,911,750		 September 30,
2019		 September 30,
2019
$ 63,270
14,906
4,235
1,670
60,001
$ 144,082
September 30,
2019
$ 3,942,512
2,613,303
1,673,744
35,586
$ 8,265,145

Please refer to Items (2) to (5) in Note 38 - Disclosure of insurance contract-related information for more details on insurance liabilities presented above.

22. Retirement benefit plan

Defined benefit plan expenses for periods from July 1 to September 30, 2020 and 2019, and from January 1 to September 30, 2020 and 2019, were calculated using the rate of pension costs determined from actuarial method as of December 31, 2019 and 2018; the above amounts were reported at NT$2,364,000, NT$2,668,000, NT$7,090,000 and NT$8,004,000, respectively.

23. Other liabilities - others

23. Other liabilities-others
24.
(1)		 Amount collected on behalf
Amount received in advance
Equity
Share capital
Retained Earnings
Other Equity
Share capital
Common shares
Authorized shares
(thousands)
Authorized capital
Shares issued and fully
paid up (thousands)
Issued share capital		 September 30,
2020
$ 85,142
3,161
$ 88,303
September 30,
2020
$ 3,011,638
3,459,284
161,566
$ 6,632,488
September 30,
2020
301,163.8
$ 3,011,638
301,163.8
$ 3,011,638		 December 31,
2019
$ 75,096
1,744
$ 76,840
December 31,
2019
$ 3,011,638
3,392,600
407,023
$ 6,811,261
December 31,
2019
301,163.8
$ 3,011,638
301,163.8
$ 3,011,638		 September 30,
2019
$ 79,144
2,783
$ 81,927
September 30,
2019
$ 3,011,638
3,226,395
268,016
$ 6,506,049
September 30,
2019
301,163.8
$ 3,011,638
301,163.8
$ 3,011,638
  • 33 -

(2)

All issued common shares have a face value of NT$10 per share. Each share is entitled to one voting right and the right to receive dividends. Retained earnings and dividend policy

According to the earnings appropriation policy of the Articles of Incorporation: Annual surpluses concluded by the Company are first subject to taxation and reimbursement of previous losses, followed by a 20% provision or reversal of special reserve as required by the authorities. The Company may retain an appropriate amount of earnings before distributing the remainder to shareholders as dividends. Refer to Note 25-(3) - Employee and director remuneration for the Company’s employee and director remuneration policy outlined in the Articles of Incorporation.

In addition to complying with requirements of the Insurance Act (see Note 29), the Company’s dividend decisions involve several factors including the current business environment and growth stage, its future capital requirements and long-term financial plan, and shareholders’ needs for cash flow. Payment of cash dividends shall amount to no less than 10% of total dividends.

The Company shall continue providing for legal reserve until the balance equals its paid-up capital. Legal reserves can be taken to offset previous losses. The Company is permitted under Article 241 of the Company Act to distribute legal reserves that it had previously provided according to Article 145-1 of the Insurance Act back to shareholders at the existing shareholding percentage, when the Company has no cumulative losses outstanding. To do so, the Company is required to present documentary proof of its financial position and seek permission from the competent authority before a shareholder meeting in the manners outlined in Letter Jin-Guan-Bao-Cai-Zi No. 10202501991 dated February 8, 2013.

Provision and reversal of special reserves are performed in accordance with Letter Jin-Guan-Bao-Cai-Zi No. 10102508861, Letter Jin-Guan-Bao-Cai-Zi No. 10502066461, and “Q&A on Special Reserves Treatment after IFRSs Adoption” issued by the authority. If other contra equity items are reversed on a later date, the Company may distribute the amount of reversal back to shareholders.

The following are details of the 2019 and 2018 earnings appropriation resolved during annual general meetings held on June 23, 2020 and June 27, 2019, respectively:

respectively:
Legal reserve
Special reserve (Note 1)
Special reserve (Note 2)
Dividends		 Earnings appropriationplan
2019
2018
$ 116,194
$ 90,358
207,452
208,715
(
1,843 )
2,160
289,117
147,570		 Dividends per share
(NT$)
2019
$ 116,194
207,452
(
1,843 )
289,117		 2019
$ 0.96		 2018
$ 0.49

Note 1: According to “Regulations Governing Reserve Provisioning by Insurance Enterprises,” insurance enterprises are required to make new provisions of special claim reserve for major incidents and change of risk and add them to special earnings reserve at the end of each year, starting from January 1, 2011. As a result, this portion of earnings is unavailable for distribution or other purpose. New provisions amounting to NT$207,452,000 for 2019 had been made and accounted on December 31, 2019. Net provisions for January 1 to September 30, 2020 were estimated at NT$145,003,000.

  • 34 -

  • Note 2: Represents net special reserve provided (reserved) for FinTech development according to Jin-Guan-Bao-Cai-Zi No. 10502066461 issued by the authority.

  • (3) Special reserve (including provision of special reserve required for first-time adoption of IFRSs)

adoption of IFRSs) adoption of IFRSs) adoption of IFRSs)
1.
Details of special reserve made for first-time adoption of IFRSs:
September 30,
2020
December 31,
2019
September 30,
2019
Special reserve
$ 51,849
$ 51,849
$ 51,849
$ 51,849

Because the amount of increase in retained earnings after first-time adoption of IFRSs was relatively low, the Company only provided for special reserve on the NT$51,849,000 increase in retained earnings that occurred following the adoption of IFRSs.

This special reserve can be reversed proportionally back into retained earnings and distributed to shareholders when the underlying assets are used, disposed or reclassified on a later date. Special reserves provided during first-time adoption of IFRSs can be used to offset losses in subsequent years. If the Company makes earnings in subsequent years at a time when the initial reason for providing special reserves no longer exists, the Company shall make up for the required amount of special reserve before distributing earnings.

In order to support development of financial technologies and protect the interests of employees, the Company is required to make provisions totaling 0.5% to 1% of after-tax net income to special reserve when distributing earnings between 2016 and 2018. Starting from 2017, the Company may reverse the above special reserve for amounts incurred on the transfer or reassignment of employees that are related to development of financial technology.

  1. Change of special reserve balance between January 1 and September 30, 2020 and 2019:
and 2019:
January 1 to
September
30, 2020
Opening
balance
Current
provisions
Closing balance
January 1 to
September
30, 2019
Opening
balance
Current
provisions
Closing balance		 Special reserve
$ 1,681,701
-
$ 1,681,701
$ 1,474,249
-
$ 1,474,249		 Financial
technology
$ 6,567

1,843)
$ 4,724
$ 4,407
2,160
$ 6,567		 Provision for
first-time
adoption of
IFRSs
$ 51,849
-
$ 51,849
$ 51,849
-
$ 51,849		 Total
( ( $ 1,740,117

1,843)
$ 1,738,274
$ 1,530,505
2,160
$ 1,532,665
  • 35 -

(4) Other equity items Unrealized gains/losses on financial assets at fair value through other comprehensive income

income
Opening balance
Generated in current period
Unrealized gains
Debt instrument
Equity instrument
Transfer of cumulative
gains/losses
to
retained
earnings
following disposal of
equity instrument
Closing balance		 January 1 to
September 30,2020
$ 407,023
45,523
(
122,990)
(
167,990)
$ 161,566		 January 1 to
September 30,2019
$ 27,302
17,415
223,299
-
$ 268,016

25. Net income from continuing operations (1) Interest income

Interest income
Bank deposit
Financial Assets at Fair
Value through Profit
or Loss
Debt instruments at fair
value through other
comprehensive
income
Financial assets carried
at
cost
after
amortization
Others		 July 1 to
September 30,
2020
$ 6,352
3,498
$ 3,071
7,867
889
$ 21,677		 July 1 to
September 30,
2019
$ 8,298
491
$ 2,890
8,178
1,221
$ 21,078		 January 1 to
September 30,
2020		 January 1 to
September 30,
2019
$ 24,205
13,030
$ 7,474
25,720
3,660
$ 74,089
$ 6,352
3,498
$ 3,071
7,867
889
$ 21,677		 $ 20,475
13,136
$ 9,122
23,796
3,000
$ 69,529		 $ 24,205
13,030
$ 7,474
25,720
3,660
$ 74,089

(2) Employee benefit expenses

Employee
welfare
expenses
Salary
Labor/
health
insurance premium
Pension expense
Remuneration
to
Director
Other
employee
welfare expenses		 July1 to September 30,2020 July1 to September 30,2020 July1 to September 30,2020 July1 to September 30,2020 July1 to September 30,2020 July1 to September 30,2020 July1 to September 30,2019 July1 to September 30,2019 July1 to September 30,2019 July1 to September 30,2019 July1 to September 30,2019
Presented as
operating
cost		 Presented as
operating
expense		 Total Presented as
operating
cost
$ 70,134
-
-
-
-
$ 70,134		 Presented as
operating
expense		 Total
$ 80,504
-
-
-
-
$ 80,504		 $ 139,625
14,620
7,501
2,786
3,973
$ 168,505		 $ 220,129
14,620
7,501
2,786
3,973
$ 249,009		 $ 138,520
14,263
7,583
2,648
3,594
$ 166,608		 $ 208,654
14,263
7,583
2,649
3,593
$ 236,742
  • 36 -
January1 to September 30,2020
Presented as
operating
cost
Presented as
operating
expense
Total
Employee
welfare
expenses
Salary
$ 245,889
$ 423,284
$ 669,173
Labor/
health
insurance premium
-
43,935
43,935
Pension expense
-
22,292
22,292
Remuneration
to
Director
-
7,799
7,799
Other
employee
welfare expenses
-
10,518
10,518
$ 245,889
$ 507,828
$ 753,717
July 1 to
September 30,
2020
July 1 to
September 30,
2019
Retirement benefits
Defined
contributio
n plan
$ 5,137
$ 4,915
Defined
benefit
plan (Note
22)
2,364
2,668
$ 7,501
$ 7,583		 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019
Presented as
operating
cost		 Presented as
operating
expense		 Total Presented as
operating
cost		 Presented as
operating
expense		 Total
$ 4,915
2,668
$ 7,583

As of September 30, 2020 and 2019, the Company employed a total of 870 and 860 employees, respectively.

(3) Employee and director remuneration

According to the Articles of Incorporation, the Company may provide employee remuneration at no less than 1% and director remuneration at no higher than 0.6% of pre-tax profit before employee and director remuneration. However, earnings must first be taken to offset cumulative losses, if any, before the remainder is distributed as employee and director remuneration in the above percentages. Employee remuneration and director remuneration were estimated at 1% and 0.6% of the abovementioned pre-tax profit, respectively, for periods July 1 to September 30 and January 1 to September 30, 2020 and 2019. All amounts have been expensed in statements of comprehensive income for the respective periods.

Employee remuneration and director remuneration estimated for periods July 1 to September 30 and January 1 to September 30, 2020 and 2019, are as follows: Amount estimated

Amount estimated
Employee
remuneration
Director remuneration		 July 1 to
September 30,
2020
$ 1,589
$ 954		 July 1 to
September 30,
2019
$ 1,640
$ 983		 January 1 to
September 30,
2020
$ 2,474
$ 1,485		 January 1 to
September 30,
2019
$ 5,313
$ 3,187

If the amount changes after the financial statements are approved and announced to the public, the difference will be treated as a change in accounting estimate and recognized as a gain or loss in the following year.

  • 37 -

The following are details of the 2019 and 2018 employee and director remuneration resolved during board of directors meetings held on March 26, 2020 and 2019:

and 2019:
Employee
remuneration
Director
remuneration		 2019
Cash
Shares
$ 6,744
$ -
4,046
-		 2018
Cash
$ 6,744
4,046		 Cash
$ 5,322
3,193		 Shares
$ -
-

The actual amounts of employee remuneration and director remuneration paid for years 2019 and 2018, as resolved in the above board meetings, were indifferent from the amounts recognized in the 2019 and 2018 financial statements.

Please visit “Market Observation Post System” for more information regarding employee/director remuneration resolved during the Company’s board of director meetings in 2020 and 2019.

(4) Depreciation and amortization

(4)
Depreciation and amortization
July 1 to
September 30,
2020
Property, Plant and
Equipment
$ 4,395
Right-of-use asset
731
Investment Property
1,573
Intangible Assets
2,948
Total
$ 9,647
July 1 to
September 30,
2020
Depreciation and
amortization expenses
by function
Depreciation
(classified as
operating costs)
$ 1,573
Depreciation
(classified as
operating
expenses)
5,126
Amortization
(classified as
operating
expenses)
2,948
Total
$ 9,647
(5)
Gain/loss on investment property
July 1 to
September 30,
2020
Rental income
$ 16,297
Direct expenses
associated with rental
income
(
3,241)
$ 13,056		 July 1 to
September 30,
2019
$ 3,005
448
1,734
1,702
$ 6,889
July 1 to
September 30,
2019
$ 1,734
3,453
1,702
$ 6,889
July 1 to
September 30,
2019
$ 17,462
(
3,410)
$ 14,052		 January 1 to
September 30,
2020
$ 12,155
1,947
4,820
7,058
$ 25,980
January 1 to
September 30,
2020
$ 4,820
14,102
7,058
$ 25,980
January 1 to
September 30,
2020
$ 49,470
(
10,170)
$ 39,300		 January 1 to
September 30,
2019
$ 8,947
1,113
5,204
5,352
$ 20,616
January 1 to
September 30,
2019
$ 5,204
10,060
5,352
$ 20,616
January 1 to
September 30,
2019
( ( ( $ 52,334
10,148)
$ 42,186
  • 38 -

(6) Gain/loss on foreign exchange

Total gain on foreign
exchange
Total loss on foreign
exchange
Net gain (loss)
Total gain/loss on
foreign exchange
Gain (loss) on
exchange -
investment
(Note)
Gain (loss) on
exchange -
non-investment		 July 1 to
September 30,
2020
$ 1,140
(
15,362)
($ 14,222)
( $ 10,653 )
(
3,569)
($ 14,222)		 July 1 to
September 30,
2019
$ 7,591
(
10,005)
($ 2,414)
( $ 3,231 )
817
($ 2,414)		 January 1 to
September 30,
2020
$ 19,208
(
41,378)
($ 22,170)
( $ 17,283 )
(
4,887)
($ 22,170)		 January 1 to
September 30,
2019		 January 1 to
September 30,
2019
(
(
(
(
(		 (
(
(
(		 (
(
(
(
(		 ( $ 27,078
21,460)
$ 5,618
$ 2,843
2,775
$ 5,618

Note: Derived from foreign currency time deposits.

  1. Income tax expense for continuing operations

(1) Income tax recognized in profit and loss

Main components of income tax expense:

Current income tax
From current profit
Adjustment of
previous year
figures
Deferred income tax
From current profit
Income tax expense
recognized in profit
and loss		 July 1 to
September 30,
2020
$ 14,323
-
(
2,002 )
$ 12,321		 July 1 to
September 30,
2019
$ 22,724
-
(
882 )
$ 21,842		 January 1 to
September 30,
2020
$ 53,560
(
57 )
2,139
$ 55,642		 January 1 to
September 30,
2019		 January 1 to
September 30,
2019
( ( ( (
(		 $ 79,757
179 )
818)
$ 78,760
  • (2) Assessment of income tax return

The Company’s profit-seeking enterprise income tax returns have been certified by the tax authority up till 2017.

27. Earnings per share

Net income and the number of weighted average common shares used for calculating earnings per share are explained below:

Current net income

Current net income
Net income used for
calculating earnings per
share		 July 1 to
September 30,
2020
$ 144,045		 July 1 to
September 30,
2019
$ 139,491		 January 1 to
September 30,
2020
$ 187,811		 January 1 to
September 30,
2019
$ 443,995
  • 39 -

Number of shares

Number of shares
Weighted average common
shares used for
calculating basic earnings
per share
Dilutive effect of potential
common shares:
Employee
remuneration
Weighted average common
shares used for
calculating diluted
earnings per share		 July 1 to
September 30,
2020
301,164
129
301,293		 July 1 to
September 30,
2019
301,164
315
301,479		 Unit: thousand shares
January 1 to
September 30,
2020
January 1 to
September 30,
2019
301,164
301,164
241
299
301,405
301,463
301,164
299
301,463

If the Company has the option to distribute employee remuneration either in cash or in shares, then the calculation of diluted earnings per share shall be made by assuming full share-based payment. In which case, the number of potential common shares is added to the calculation of weighted-average outstanding shares as soon as they become dilutive, and this is the basis used for calculating diluted earnings per share. Dilutive effects of potential common shares will continue to be taken into account when calculating diluted EPS for next year’s decision of share-based employee remuneration. 28. Cash flow information

Change of liabilities relating to financing activities January 1 to September 30, 2020

January 1 to September 30, 2020 January 1 to September 30, 2020 January 1 to September 30, 2020 January 1 to September 30, 2020
January 1,
2020
Cash flow
Lease
liabilities
$ 4,139
($ 1,720)
January 1 to September 30, 2019
January 1,
2019
Cash flow
Lease
liabilities
$ 2,707
($ 1,185)		 Changes without cash effect
New leases
Amortization
of interest
expense
Others
$ 1,901
$ 80
($ 80)
Changes without cash effect
New leases
Amortization
of interest
expense
Others
$ 1,659
$ 60
($ 60)		 September 30,
2020
$ 4,320
September 30,
2019

Lease
liabilities
January 1,
2019
$ 2,707
New leases
$ 1,659		 Amortization
of interest
expense
$ 60
( ( $ 3,181

29. Capital risk management

Please refer to Note 37(6) for more information on the management of asset and liability risks. According to the Insurance Act, the Company is required to maintain capital at no less than 200% of risk-weighted assets. Failure to maintain the abovementioned ratio will render the Company unable to distribute earnings; in addition, the Company would be required to raise capital within the due dates specified by the competent authority or have business activities and use of capital restricted in certain ways. As of September 30, 2020, the Company had maintained its capital above the percentage stated in the Insurance Act and was not subject to the above treatments.

  • 40 -

30. Financial instruments

  • (1) Fair value information - financial instruments that are not measured at fair value

The management considers that all financial assets and liabilities not measured at fair value have had book values closely resembling their fair values, or that their fair values can not be determined reliably.

  • (2) Fair value information - financial instruments with fair value measured on a recurring basis

1. Fair value hierarchy September 30, 2020

ring basis
Fair value hierarchy
September 30, 2020
Financial Assets at Fair Value
through Profit or Loss
TWSE/TPEx listed shares
Fund beneficiary certificates
Bond investments - bank
debentures
Total
Financial assets at fair value
through other
comprehensive income
TWSE/TPEx listed common
shares
Non-listed domestic common
shares
Government bonds
Total
Guarantee deposits paid
TWSE/TPEx listed securities
- Bond investments
December 31, 2019
Financial Assets at Fair Value
through Profit or Loss
TWSE/TPEx listed shares
Fund beneficiary certificates
Bond investments - bank
debentures
Total
Financial assets at fair value
through other
comprehensive income
TWSE/TPEx listed common
shares
Non-listed domestic common
shares
Government bonds
Total
Guarantee deposits paid
TWSE/TPEx listed securities
- Bond investments		 Level 1
$ 611,500
1,639,998
-
$ 2,251,498
$ 1,056,619
-
491,016
$ 1,547,635
$ 579,036
Level 1
$ 735,535
858,993
-
$ 1,594,528
$ 1,730,675
-
509,305
$ 2,239,980
$ 517,861		 Level 2
$ -
-
-
$ -
$ -
-
-
$ -
$ -
Level 2
$ -
-
-
$ -
$ -
-
-
$ -
$ -		 Level 3
$ -
-
50,087
$ 50,087
$ -
848,028
-
$ 848,028
$ -
Level 3
$ -
-
50,565
$ 50,565
$ -
945,763
-
$ 945,763
$ -		 Total
$ 611,500
1,639,998
50,087
$ 2,301,585
$ 1,056,619
848,028
491,016
$ 2,395,663
$ 579,036
Total
$ 735,535
858,993
50,565
$ 1,645,093
$ 1,730,675
945,763
509,305
$ 3,185,743
$ 517,861
  • 41 -

September 30, 2019

September 30, 2019
Financial Assets at Fair Value
through Profit or Loss
TWSE/TPEx listed shares
Fund beneficiary certificates
Bond investments - bank
debentures
Total
Financial assets at fair value
through other
comprehensive income
TWSE/TPEx listed common
shares
Non-listed domestic common
shares
Government bonds
Total
Guarantee deposits paid
TWSE/TPEx listed securities
- Bond investments		 Level 1
$ 1,101,060
1,059,781
-
$ 2,160,841
$ 1,135,299
-
507,442
$ 1,642,741
$ 515,524		 Level 2 Level 3
$ -
-
50,068
$ 50,068
$ -
930,539
-
$ 930,539
$ -		 Total
$ -
-
-
$ -
$ -
-
-
$ -
$ -		 $ 1,101,060
1,059,781
50,068
$ 2,210,909
$ 1,135,299
930,539
507,442
$ 2,573,280
$ 515,524

In periods January 1 to September 30, 2020 and 2019, there was no change of fair value measurement between level 1 and level 2.

  1. Reconciliation of level 3 fair value assessment on financial instruments

January 1 to September 30, 2020

Financial assets Measured at fair value through Measured at fair value through Measured at fair value through Measured at fair value through profit and loss Financial assets at fair value
through other comprehensive
income		 Financial assets at fair value
through other comprehensive
income		 Financial assets at fair value
through other comprehensive
income		 Financial assets at fair value
through other comprehensive
income		 Total
Derivatives Equity
instrument		 Debt
instrument
$ 50,565
(
478 )
-
$ 50,087
$ 87		 Equity
instrument		 Debt
instrument
Opening balance
Recognized through profit and
loss (gain/loss on financial
assets or liabilities at fair
value through profit and loss)
Recognized through other
comprehensive income
(gain/loss on valuation of
equity instruments at fair
value through other
comprehensive income)
Closing balance
Unrealized gains and losses at
the end of period		 $ -
-
-
$ -
$ -		 $ -
-
-
$ -
$ -		 ( $ 945,763
-

97,735)
$ 848,028
$ 158,222		 $ -
-
-
$ -
$ -		 $ 996,328
(
478 )
(
97,735)
$ 898,115
$ 158,309

January 1 to September 30, 2019

Financial assets Measured at fair value through Measured at fair value through Measured at fair value through Measured at fair value through profit and loss Financial assets at fair value
through other comprehensive
income		 Financial assets at fair value
through other comprehensive
income		 Financial assets at fair value
through other comprehensive
income		 Financial assets at fair value
through other comprehensive
income		 Total
Derivatives Equity
instrument		 Debt
instrument
$ 50,556
(
488 )
-
$ 50,068
$ 68		 Equity
instrument		 Debt
instrument
Opening balance
Recognized through profit and
loss (gain/loss on financial
assets or liabilities at fair
value through profit and loss)
Recognized through other
comprehensive income
(gain/loss on valuation of
equity instruments at fair
value through other
comprehensive income)
Closing balance
Unrealized gains and losses at
the end of period		 $ -
-
-
$ -
$ -		 $ -
-
-
$ -
$ -		 $ 700,464
-
230,075
$ 930,539
$ 240,733		 $ -
-
-
$ -
$ -		 $ 751,020
(
488 )
230,075
$ 980,607
$ 240,801

  • 42 -

  • Level 3 fair value measurement technique and input

    • (1) For investments in domestic unlisted shares, fair value is calculated using the market comparable model. The market comparable model compares the subject to companies involved in the same or similar business activities. Factors such as the price of shares transacted in active market, the value multiples implied in pricing, and liquidity discount are used to determine the value of the subject. Liquidity premium/discount is a significant yet unobservable input.

    • (2) Bond investment - bank debentures are valued by calculating the present value of expected yields from the investment, which involves discounting of future expected cash flow. Future expected cash flow is a significant yet unobservable input.

  • (3) Types of financial instrument

Financial assets
Measured at fair value
through profit and loss
Mandatory at fair
value throughout
profit and loss
Loans and receivables
(Note 1)
Financial assets carried at
cost after amortization
(Note 2)
Financial assets at fair
value through other
comprehensive income
Investment in equity
instruments
Investment in debt
instruments (Note
3)
Financial liabilities
Carried at cost after
amortization (Note 4)		 September 30,
2020
$ 2,301,585
334,210
6,589,346
1,904,647
1,070,052
598,892		 December 31,
2019
$ 1,645,093
381,669
6,560,882
2,676,438
1,027,166
653,734		 September 30,
2019
$ 2,210,909
484,904
6,301,988
2,065,838
1,022,966
658,784

  • Note 1: The balance includes loans and receivables carried at cost after amortization, such as claims recoverable from reinsurers and reinsurance accounts receivable.

  • Note 2: Balance includes cash, investment in debt instruments carried at cost after amortization, notes receivable - net, premiums receivable - net, other receivables, other financial assets, guarantee deposits paid (excluding insurance enterprise performance bonds placed in the form of securities), and financial assets carried at cost after amortization.

  • 43 -

  • Note 3: Balance includes debt instruments at fair value through other comprehensive income and insurance enterprise performance bonds placed in the form of securities (presented as guarantee deposits paid).

  • Note 4: Balance includes insurance claims and benefits payable, commissions payable, reinsurance account payable, other payables (excluding salary, bonus and leave encashment payable and pension payable), guarantee deposits received, and financial liabilities carried at cost after amortization.

  • (4) Purpose and policy of financial risk management

For the purpose of establishing sound risk management practice, internal risk awareness, and robust risk management framework, the Company has implemented relevant principles and policies along with qualitative and quantitative methods to assess, respond and monitor potential risks. The Company’s financial instruments mainly comprise equity and debt investments, receivables and payables. Key risk exposures include market risk (including exchange rate risk, interest rate risk and price risk), credit risk and liquidity risk.

  1. Market risk

Market risk refers to changes in market risk factors such as exchange rate, product price, interest rate, share price etc that may reduce the Company’s profitability or portfolio value. The Company continues to adopt Value at Risk (VaR), stress test and market risk management tools to effectively measure, monitor and manage market risks.

There is no change in how the Company manages and assesses market risk exposure of its financial instruments.

  • (1) Exchange rate risk

  • The Company holds assets and liabilities denominated in foreign

  • currencies, which presents the Company with risk of exchange rate variation. As at September 30, 2020, the Company had about 4.76% of assets that were not denominated in the functional currency of the transaction entity.

The Company had the following financial assets denominated in foreign currencies that were exposed to material exchange rate risk as at the balance sheet date: Unit: in thousands of foreign currency or NTD September 30, 2020

Financial assets
Monetary items
Bank deposit and
notes receivable
USD
EUR
CNY (RMB)
HKD
GBP
Other financial assets
USD		 Foreign
currency
$ 5,230
40
27
332
56
20,100		 Exchange
rate
29.100
34.150
4.269
3.754
37.300
29.100		 TWD(NTD)
$ 152,194
1,363
117
1,248
2,087
584,910
  • 44 -
Financial assets
Monetary items
Bank deposit and
notes receivable
USD
EUR
CNY (RMB)
HKD
GBP
Other financial assets
USD
CNY (RMB)
Financial assets
Monetary items
Bank deposit and
notes receivable
USD
EUR
CNY (RMB)
HKD
GBP
Other financial assets
USD
CNY (RMB)		 December 31,2019 December 31,2019 December 31,2019
Foreign
currency
Exchange
rate
TWD(NTD)
$ 3,376
29.980
$ 101,211
17
33.590
558
29
4.305
126
524
3.849
2,018
6
39.360
247
18,600
29.980
557,628
5,000
4.305
21,525
September 30,2019		 TWD(NTD)
Foreign
currency
$ 2,147
25
248
124
7
16,200
17,000		 Exchange
rate
31.040
33.950
4.350
3.958
38.200
31.040
4.350		 TWD(NTD)
$ 66,656
848
1,080
490
279
502,848
73,950
Unrealized foreign currency gain/loss of material impact:
January1 to September 30,2020
January1 to September 30,2019
Foreign
currency
Exchange rate
Unrealized
net
loss on
exchange
Exchange rate
Unrealized
net
Gain on
currency
exchange
USD
1:29.100
(USD:NTD)
($ 17,688)
1:31.040
(USD:NTD)
$ 5,265
CNY
(RMB)
1:4.269
(CNY:TWD)
-
1:4.350
(CNY:TWD)
(
2,074)
($ 17,688)
$ 3,191		 Unrealized foreign currency gain/loss of material impact:
January1 to September 30,2020
January1 to September 30,2019
Foreign
currency
Exchange rate
Unrealized
net
loss on
exchange
Exchange rate
Unrealized
net
Gain on
currency
exchange
USD
1:29.100
(USD:NTD)
($ 17,688)
1:31.040
(USD:NTD)
$ 5,265
CNY
(RMB)
1:4.269
(CNY:TWD)
-
1:4.350
(CNY:TWD)
(
2,074)
($ 17,688)
$ 3,191		 Unrealized foreign currency gain/loss of material impact:
January1 to September 30,2020
January1 to September 30,2019
Foreign
currency
Exchange rate
Unrealized
net
loss on
exchange
Exchange rate
Unrealized
net
Gain on
currency
exchange
USD
1:29.100
(USD:NTD)
($ 17,688)
1:31.040
(USD:NTD)
$ 5,265
CNY
(RMB)
1:4.269
(CNY:TWD)
-
1:4.350
(CNY:TWD)
(
2,074)
($ 17,688)
$ 3,191		 Unrealized foreign currency gain/loss of material impact:
January1 to September 30,2020
January1 to September 30,2019
Foreign
currency
Exchange rate
Unrealized
net
loss on
exchange
Exchange rate
Unrealized
net
Gain on
currency
exchange
USD
1:29.100
(USD:NTD)
($ 17,688)
1:31.040
(USD:NTD)
$ 5,265
CNY
(RMB)
1:4.269
(CNY:TWD)
-
1:4.350
(CNY:TWD)
(
2,074)
($ 17,688)
$ 3,191
Exchange rate
1:31.040
(USD:NTD)
1:4.350
(CNY:TWD)		 Unrealized
net
Gain on
currency
exchange
( $ 5,265

2,074)
$ 3,191

Sensitivity analysis

The Company is prone to the impact of changes in USD and CNY exchange rates.

The following sensitivity analysis shows the impact of a 1% strengthening/weakening in the foreign currency against NTD (the functional currency) to the Company. 1% is the rate of sensitivity

  • 45 -

adopted by the management when reporting exchange rate risks. It also represents the management’s estimate on the reasonable range of exchange rate variation. The sensitivity analysis only covered monetary items denominated in foreign currency, and the analysis was performed by making a 1% adjustment to the exchange rate applicable at the end of the period. The sensitivity analysis covered foreign currency bank deposit, other financial assets, and notes receivable. The following table shows decrease in pre-tax profit and equity if NTD strengthens against other currencies by 1%. Effects on pre-tax profit and equity following a 1% strengthening of the NTD against the respective foreign currencies would be the positive figure of the same amount.

Gain (loss) on USD
Gain (loss) on CNY		 January 1 to
September 30,2020
($ 7,371)
(
1)		 January 1 to
September 30,2019
($ 5,695)
(
750)

(2) Interest rate risk

The book value of financial assets exposed to interest rate risks as at the balance sheet date is presented below:

Risk of cash flow
changes due to
interest rate
- Financial assets
Risk of fair value
changes due to
interest rate
- Financial assets		 September 30,
2020
$ 895,641
1,070,052		 December 31,
2019
$ 777,511
1,027,166		 September 30,
2019
$ 657,720
1,022,966

Sensitivity analysis

The following sensitivity analysis has been prepared based on interest rate risk exposures of financial assets as at the balance sheet date. The Company had conducted the sensitivity analysis based on 1 basis-point increase/decrease in interest rate, which also represents the management’s estimate on the reasonable range of interest rate variation. A. Risk of cash flow changes due to interest rate

If interest rate increased/decreased by 1 basis point, the Company’s pre-tax profit and equity for the periods January 1 to September 30, 2020 and 2019, would increase/decrease by NT$67,000 and NT$49,000, respectively, provided that all other variables remain unchanged. Exposure to interest rate risk is mainly attributed to bank deposits (demand deposits and foreign currency deposits) held on hand.

B. Risk of fair value changes due to interest rate

All of the Company’s bond investments pay fixed interest. A change in market interest rate would cause changes in the fair value of bond investments.

If the market interest rate increased/decreased by 1 basis point, other comprehensive income (pre-tax) and equity between January 1

  • 46 -

and September 30, 2020 and 2019, would decrease/increase by NT$1,257,000 and NT$1,245,000, respectively, due to changes in the fair value of debt instruments carried at fair value through other comprehensive income.

(3) Other price risks

The Company is exposed to the risk of equity price variation due to investment in TWSE/TPEx-listed beneficiary securities and fund beneficiary certificates.

Sensitivity analysis

The sensitivity analysis is based on equity price risks of beneficiary securities and fund beneficiary certificates outstanding as at the balance sheet date.

If the equity price increased/decreased by 1%, pre-tax profit and equity between January 1 and September 30, 2020 and 2019, would increase/decrease by NT$22,515,000 and NT$21,608,000, respectively, due to changes in the fair value of financial assets carried at fair value through profit and loss. Meanwhile, other comprehensive income (pre-tax) and equity between January 1 and September 30, 2020 and 2019, would increase/decrease by NT$19,406,000 and NT$20,658,000, respectively, due to changes in the fair value of equity instruments carried at fair value through other comprehensive income.

(4) Value at risk (VaR)

VaR measures the maximum possible losses that a portfolio may incur due to a change in market risk factor, within a specified period of time and Confidence Level. The Company currently calculates VaR of the following day (2 months) at 95% confidence level.

The VaR model must be able to reasonably, completely and correctly assess maximum potential risks of financial instruments or investment portfolios held on hand to be considered a valid risk management model. When used for risk management, the VaR model must continuously undergo validation and back-testing to ensure that the model remains appropriate and effective in assessing the maximum potential risks of financial instruments or investment portfolios held on hand.

(5) Stress-testing

In addition to the VaR model, the Company conducts stress tests regularly to assess potential risks should an extreme event occur. Stress-testing is intended to measure potential impacts on the value of investment portfolio given extreme changes in a series of financial variables.

  • 47 -
Date: September 30, 2020
Risk factors
Price risk - at fair value
through profit and
loss
Price risk - at fair value
through other
comprehensive
income
Risk of fair value
changes due to
interest rate
Exchange rate risk -
other financial assets		 Unit: NTD thousands
Variation
Portfolio
gains/losses
Variation
Down 10%
($ 225,150)
Down 10%
(
190,465)
A 100bps increase in the yield
curve
(
125,655)
1% strengthening of NTD
against all foreign currencies
(
5,849)		 Unit: NTD thousands
Variation
Portfolio
gains/losses
Variation
Down 10%
($ 225,150)
Down 10%
(
190,465)
A 100bps increase in the yield
curve
(
125,655)
1% strengthening of NTD
against all foreign currencies
(
5,849)
($ 225,150)
(
190,465)
(
125,655)
(
5,849)

2. Credit risk

The Company is exposed to credit risks for engaging in treasury transactions, including issuer credit risk, counterparty credit risk, and asset credit risk:

  • (1) Issuer credit risks are mostly prevalent in treasury debt instruments or bank deposits held on hand, and refer to the possibility of the Company suffering financial losses as a result of the issuer (or guarantor) or bank failing to fulfill repayment (or stand-in payment) obligation due to default, bankruptcy or liquidation.

  • (2) Counterparty credit risks refer to the possibility of the Company suffering financial losses as a result of the transaction counterparty failing to fulfill settlement or payment obligations on the agreed date.

  • (3) Asset credit risks refer to the possibility of losses suffered as a result of deteriorated credit quality, credit rating downgrade or occurrence of default event in the underlying asset of a financial instrument. A. Credit risk concentration analysis

The table below shows financial assets with the largest credit risk exposures by region and industry:

Credit risk exposure - by region

Date: September 30, 2020 Unit: NTD thousands

Financial assets Taiwan Asia America Europe Others Total
Cash and cash
equivalents		 $ 1,676,052 $ - $ - $ - $ - $ 1,676,052
Financial assets at fair
value through profit
and loss (securitized
beneficiary certificates
and debt instruments)		 244,790 - - - - 244,790
Financial assets (debt
instrument) at fair
value through other
comprehensive income
(Note)		 1,070,052 - - - - 1,070,052
Financial assets carried at
cost after amortization		 1,759,019 - - - - 1,759,019
Other financial assets
(time deposit)		 2,658,910 - - - - 2,658,910
Total 7,408,823 - - - - 7,408,823
Regional weight 100% 0.00% 0.00% 0.00% 0.00% 100%

Note: includes debt instruments placed as guarantee deposit. B. Credit risk quality grading

  • 48 -

Credit risk quality is internally graded into Class I, II and III. Class I refers to financial assets that exhibit no significant increase in credit risk compared to the date of initial recognition; Class II refers to financial assets that exhibit significant increase in credit risk compared to the date of initial recognition; and Class III refers to financial assets that exhibit objective evidence of credit impairment.

Financial assets I II III Total
Financial assets (debt
instrument) at fair value
through other
comprehensive income		 $ 1,070,052 $ - $ - $ 1,070,052
Financial assets carried at cost
after amortization
1,759,019		 - - 1,759,019
Total $2,829,071 $ - $ - $2,829,071

Expected credit loss rates for the abovementioned Class I financial assets are 0.0258% ~ 1.9463%.

For information on credit risk management and impairment assessment of receivables, please refer to Note 12(2)~(3).

C. Criteria for significant increase in credit risk since initial recognition

A significant increase in credit risk refers to the situation where the credit rating of a financial asset on the balance sheet date is two grades lower or more than the date of initial recognition, and lower than twBBB. For bonds that are not credit-rated, the issuer’s credit rating is used instead.

D. Definition of defaulted and credit-impaired financial assets

The Company assesses financial assets for objective evidence of credit impairment. If there is evidence to suggest impairment, the financial asset will be classified Class III with expected credit losses recognized over the remaining duration.

Objective evidence of credit impairment, as mentioned above, refers to any of the following occurrences:

a. The indicative market price falls below book cost in a continuous downward trend for more than one year, unless there is reason to suggest likely recovery of the indicative market price.

  • b. The issuer undergoes financial distress and is de-listed or liquidated as a result.

  • c. Event of default, such as failure to pay interest or principal.

  • d. The issuer undergoes bankruptcy.

(4)

Assessment of expected credit losses

  • A. Expected credit losses are estimated by multiplying the amount of credit exposure with the probability of default (PD) and loss given default (LGD).

Financial assets that are classified as Class I as at the balance sheet date shall have expected credit losses estimated over the next 12 months.

Financial assets that are classified as Class II as at the balance sheet date shall have expected credit losses estimated over the remaining duration

Financial assets that exhibit objective evidence of credit impairment as at the balance sheet date shall be classified as Class III and have expected credit losses estimated over the remaining duration.

  • 49 -

B. Loss provisions variation chart

Reconciliation of opening and closing loss provision balance between January 1 and September 30, 2020:

Investment in
debt
instruments
Opening balance
Variation
Closing balance
Receivables
Opening balance
Variation
Closing balance		 12-month
expected credit
loss		 12-month
expected credit
loss		 Expected credit
loss over the
remaining
duration		 Expected credit
loss over the
remaining
duration		 Expected credit
loss over the
remaining
duration		 Expected credit
loss over the
remaining
duration		 Impairment
provided in
accordance
with IFRS 9
(Subtotal)		 Difference with
impairments
provided in
accordance
with
“Regulation on
Asset
Valuation,
Overdue
Collection and
Loan Loss
Provisioning by
Insurance
Companies”		 Difference with
impairments
provided in
accordance
with
“Regulation on
Asset
Valuation,
Overdue
Collection and
Loan Loss
Provisioning by
Insurance
Companies”		 Total
( $ 17,079

953)
$ 16,126		 $ -
-
$ -		 $ -
-
$ -		 ( $ 17,079

953)
$ 16,126		 $ -
$ -		 ( $ 17,079

953)
$ 16,126
( $ 5,706

47)
$ 5,659		 $ -
-
$ -		 $ -
-
$ -		 ( $ 5,706

47)
$ 5,659		 $ 43,001
47
$ 43,048		 $ 48,707
-
$ 48,707

3. Liquidity risk

  • (1) Definition of liquidity risk

For each financial instrument, liquidity risk is distinguished between “capital liquidity risk” and “market liquidity risk.”

“Capital liquidity risk” refers to the inability to liquidate an asset or obtain sufficient funding to meet obligations upon maturity. “Market liquidity risk” refers to the possibility of incurring losses due to significant price changes when the asset held on hand is being disposed or settled in a market that lacks depth or at a time of disorder. (2) Liquidity risk management

The Company has implemented a robust capital liquidity risk management system, and adopted market liquidity risk management practices that conform to the volume of market transactions and the positions held on hand. The Company has also devised response plans for extraordinary and emergency liquidity situations where the Company may require additional capital.

(3) The Company maintains adequate position of cash and cash equivalents to support corporate operations and to mitigate effects of cash flow variation.

  • 50 -

The following table is a maturity analysis for non-derivative financial liabilities (including insurance claims payable, commissions payable, reinsurance account payable, other payables and lease liabilities) with pre-arranged repayment date. The analysis has been prepared based on the earliest date by which the Company may be required to repay, using undiscounted cash flow.

September 30, 2020

undiscounted cash flow.
September 30, 2020		 sh flow.
020		 sh flow.
020
Repayable
upon demand
or within 1
month
Non-derivative
financial liabilities
Non-interest bearing
liabilities
$ 230,213
Lease liabilities
-
$ 230,213
December 31, 2019
Repayable
upon demand
or within 1
month
Non-derivative
financial liabilities
Non-interest bearing
liabilities
$ 261,262
Lease liabilities
-
$ 261,262
September 30, 2019
Repayable
upon demand
or within 1
month
Non-derivative
financial liabilities
Non-interest bearing
liabilities
$ 227,625
Lease liabilities
-
$ 227,625		 Repayable
upon demand
or within 1
month		 1~3 months 3 months ~ 1
year		 1~5years 5 years and
above
$ 97,898
793
$ 98,691
1~3 months		 $ 256,251
1,661
$ 257,912
3 months ~ 1
year		 $ 14,530
1,984
$ 16,514
1~5years		 $ -
-
$ -
5 years and
above
$ 54,168
510
$ 54,678
1~3 months		 $ 323,190
1,790
$ 324,980
3 months ~ 1
year		 $ 15,114
1,961
$ 17,075
1~5years		 $ -
-
$ -
5 years and
above

Non-derivative
financial liabilities
Non-interest bearing
liabilities
Lease liabilities
$ 227,625
-
$ 227,625		 $ 95,332
463
$ 95,795		 $ 320,713
1,389
$ 322,102		 $ 15,114
1,517
$ 16,631		 $ -
-
$ -

31. Related party transactions

(1) Name and relationship of related parties

Name of related party Relationship with the Company Yi Chih Co., Ltd. Other related parties OSTA TRADING CO., LTD. Other related parties Zong Cheng Enterprise Co., Ltd. Other related parties Du Ho Enterprise Co., Ltd. Other related parties Chien Yi Industrial Co., Ltd. Other related parties Chien Cheng Development Co., Ltd. Other related parties Hua Wang Manufacturer Co., Ltd. Other related parties Hai Hwa Construction Co., Ltd. Other related parties Tsai Cheng Enterprise Co., Ltd. Other related parties

(Continued next page)

  • 51 -

(Continued from previous page)

Name of related party Relationship with the Company Tai Jing Apartment Building Management Other related parties and Maintenance Co., Ltd. Taiwan Fuji Die Co., Ltd. Other related parties Yongji Enterprise Co., Ltd. Other related parties Chimax Development Company Other related parties Pao Shan Construction Co., Ltd. Other related parties Yiguang Enterprise Development Co., Ltd. Other related parties Chien Chi Co., Ltd. Other related parties Taiwan Real Estate Management Co., Ltd. Other related parties Jiatai Construction Co., Ltd. Other related parties Jinshi Construction Co., Ltd. Other related parties Jui San Co., Ltd. Other related parties Fu Bi Shi Construction Co., Ltd. Other related parties Other related parties Second degree relatives or closer to the company’s director, Chairman, President, Manager, or spouse thereof

(2) Major transactions with related parties 1. Premium revenues

Premium revenues
Type of relatedparty
Other related parties		 July 1 to
September 30,
2020
$ 762		 July 1 to
September 30,
2019
$ 818		 January 1 to
September 30,
2020
$ 2,581		 January 1 to
September 30,
2019
$ 2,631

The above insurance coverage to other related parties were underwritten with the same terms as non-related parties.

  1. Insurance claims paid
Type of relatedparty
Other related parties		 July 1 to
September 30,
2020
$ 172		 July 1 to
September 30,
2019
$ 1		 January 1 to
September 30,
2020
$ 2,814		 January 1 to
September 30,
2019		 January 1 to
September 30,
2019
$ 4

The above insurance coverage to other related parties were underwritten with the same terms and claim criteria as non-related parties.

  1. Rental expense
Rental expense
Type of relatedparty
Other related parties		 July 1 to
September 30,
2020
$ -		 July 1 to
September 30,
2019
$ -		 January 1 to
September 30,
2020
$ 4		 January 1 to
September 30,
2019
$ 6

Rental of conference room from the above related parties were undertaken at terms that were not materially different from ordinary transactions.

  • 52 -

4. Premiums receivable

Premiums receivable
Type of relatedparty
Other related parties		 September 30,
2020
$ 354		 December 31,
2019
$ 464		 September 30,
2019
$ 540
  • (3) Remuneration to the executive management
Short-term
employee
benefits
Retirement benefits		 July 1 to
September 30,
2020
$ 11,471
1,023
$ 12,494		 July 1 to
September 30,
2019
$ 11,492
664
$ 12,156		 January 1 to
September 30,
2020
$ 33,840
3,069
$ 36,909		 January 1 to
September 30,
2019		 January 1 to
September 30,
2019
$ 36,793
1,991
$ 38,784

Compensation to directors and members of the executive management is determined by the Remuneration Committee based on individual performance and market trends.

32. Major contingent liabilities and unrecognized contractual commitments

The Company is a non-life insurance company, and had no major commitment or contingent liability as at the balance sheet date apart from those mentioned in other footnotes and the following.

(1) Major unrecognized contractual commitments As of September 30, 2020, December 31, 2019, and September 30, 2019, the Company had the following expenses that were contracted but unpaid.

Types of unrecognized
contractual commitments
System development
expense
Project consultancy
expense		 September 30,
2020
$ 6,196
$ 52,500		 December 31,
2019
$ 14,994
$ -		 September 30,
2019		 September 30,
2019
$ 23,237
$ -
  • (2) Contingent liabilities

As of September 30, 2020, the Company had 7 unresolved major lawsuits concerning its insurance business. The Company was being claimed for a sum of NT$34,068,000, and NT$24,935,000 of which were covered by reinsurance while the remaining balance was covered by adequate claim reserve. These cases are currently being reviewed by court.

  1. Losses from major disasters: None.

  2. Other matters

Please see Note 13 for impacts of COVID-19.

  1. Major post-balance sheet events: None. 36. Information on foreign currency-denominated financial assets and liabilities and exchange rate:

Please refer to paragraph 1. Market risk in Note 30(4) for foreign currency-denominated financial assets of material impact.

  1. Risk management goals, policies, procedures and methods

  2. (1) Risk management policies and goals

The Company has established risk management policies and procedures according to “Risk Management Best Practice Principles for Insurance Enterprises” and “Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises” to provide the foundation needed to facilitate

  • 53 -

proper risk management, business expansion, accomplishment of operational targets, and enhancement of shareholder value. These policies and procedures also provide the basis for other risk management guidelines within the Company. (2) Risk management framework, organization and responsibilities

  1. Risk management framework and organization

The board of directors outlines the Company’s risk management policies based on overall operational strategies and the prevailing business environment. The board is ultimately responsible for overall risk management within the Company. A Risk Management Committee has been assembled under the board of directors while a Risk Management Department has been created outside of business units to enable continuous monitoring of the risk management system. The independent director serves as the convener for the Risk Management Committee. The committee’s responsibilities are to supervise risk exposures and to ensure that the Company has adequate capital to meet all risks. The Risk Management Department is responsible for executing the risk management policy, consolidating risk information from all departments, and communicating/coordinating across different departments for the execution of risk policies and limits.

  1. The responsibilities of each unit are listed as below: Board of Directors

  2. (1) The board of directors is the highest decision maker of risk management issues, and is ultimately responsible for overall risk management within the Company.

  3. (2) The board is responsible for the establishment of proper risk management systems and cultures, approval and regular review of risk management policies, and making the most efficient allocation of available resources.

  4. (3) The board evaluates risks, consequences and effects from the perspective of the entire organization. It also makes decisions in line with legal capital requirements imposed by the competent authority, while taking into consideration various financial and business rules that are relevant to capital allocation.

  5. (4) The board reviews risk appetite on a yearly basis and makes adjustments as deemed appropriate.

  6. (5) The Chairman is authorized to approve risk management-related policies within the Company.

Risk Management Committee

  • (1) The committee outlines the Company’s risk management policies, framework and organization, and implements quantitative or qualitative standards for the Company’s major risk exposures. The committee presents formal reports to the board of directors at least twice a year, and provides the board with relevant updates and recommendation as deemed necessary.

  • (2) The committee executes the board’s risk management decisions and performs full-scale review of the Company’s risk management system, implementation and execution at least once a year.

  • (3) The committee assists and supervises various departments in risk management activities.

  • (4) The committee adjusts risk exposure category, risk limit and risk mitigation methods depending on changes in the environment.

  • 54 -

  • (5) The committee coordinates risk management practices and establishes communication and interaction across different departments.

  • (6) The committee supervises overall risk management of the Company. Risk Management Department

  • (1) The department assists in the development of risk management policy, framework and organization, and executes board-approved risk management policy.

  • (2) The department assists in setting risk limits based on risk appetite.

  • (3) The department is responsible for consolidating risk information from all departments, and communicating/coordinating across different departments for the execution of risk policies and limits.

  • (4) The department prepares monthly risk management reports.

  • (5) The department monitors breach and use of risk limit by business units at least twice a year.

  • (6) The department assists in stress testing.

  • (7) The department performs back testing where necessary.

  • (8) The department resolves breach of risk limit by other units.

  • (9) Other risk management-related affairs. Business units

  • (1) Identify risk and report risk exposure

  • (2) Assess extent of impact (quantitative or qualitative) in the occurrence of risk event, and convey risk information in a timely and accurate manner.

  • (3) Review risk exposure and limits at least twice a year to ensure that risk limits are properly executed within business units.

  • (4) Monitor risk exposure and report limit breach, including actions taken by the business unit in response to the breach.

  • (5) Assist in the development of risk model. Ensure that the business unit adopts consistent and rational assumptions and basis for its risk assessment and modeling.

  • (6) Ensure that internal control procedures are effectively executed by the business unit in a manner that complies with laws and the Company’s risk management policy.

  • (7) Assist in the gathering of operational risk-related data.

  • (8) The head of each business unit shall supervise the transfer of risk management information to the Risk Management Department, and is responsible for the daily risk management, reporting and response of the assigned unit.

  • (9) The head of each business unit shall assign risk management personnel to assist them in the effective execution of risk management tasks.

  • Internal audit

Internal auditors are responsible for auditing business activities of high integrity risk in accordance with Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and prevailing regulations. They also assess risk management practices of various business units and the Risk Management Department, and review the design and execution of internal control system. A formal report containing internal auditors’ findings is prepared and presented to the board of directors.

  • (3) Control and disclosure of key risks

The Company has systems and practices in place to manage key risk categories that arise in relation to its business activities, such as market risk, credit risk,

  • 55 -

liquidity risk, assets and liabilities matching risk, insurance risk and operational risk. These systems and practices are constantly reviewed (including assessment on the effectiveness of risk management system and appropriateness of risk factors) to accommodate the Company’s goals, risk exposures and changes in the external environment. The board of directors is reported regularly on the Company’s risk management progress, and advised on possible improvements whenever deemed necessary.

  • (4) Control of insurance contract risks

Insurance contract risks can be distinguished into several risk sub-categories by stages of business activity, including product design and pricing risk, underwriting risk, reinsurance risk, disaster risk, claims risk, and reserve-related risk. Definitions of each risk sub-category are as follows:

  1. Insurance risks Insurance risk refers to the risk of loss caused by unexpected changes after

the Company has collected insurance premiums, assumed the transfer of risk from insured parties and become obliged to pay claims and associated expenses.

  1. Product design and pricing risks

Product design and pricing risk refers to the risk of using inappropriate or inconsistent information for product design, terms setting and pricing, or the risk of reference information becoming obsolete due to unexpected change in circumstances.

  1. Underwriting risks

Underwriting risk refers to the risk of unexpected losses and expenses arising from business solicitation and underwriting review.

  1. Reinsurance risks

Reinsurance risk refers to the risk of reinsurers becoming unable to fulfill obligations for undertaking risks beyond capacity without proper reinsurance arrangement, and thereby rendering the Company unable to collect premiums, claims, or expenses from reinsurers.

  1. Disaster risks

Disaster risk refers to the risk of one or multiple insurance categories suffering losses due to occurrence of risk events, to the extent that may negatively affect the Company’s credit rating or solvency.

  1. Claims risks

Claims risk refers to the risk of mishandling customers’ claim requests.

  1. Reserve-related risks

Reserve-related risk refers to the risk of underestimating liabilities on insurance coverage underwritten by the Company, leaving insufficient reserves to meet future obligations.

The Company has a set of “Insurance Risk Management Guidelines” and systems in place to manage insurance risks. The risk management process includes risk identification, assessment, response, monitoring and reporting.

  • (5) Control of insurance risk exposure and avoidance of risk concentration

The Company has adopted practices in accordance with “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms “to manage the risks of retained, ceded, and assumed insurance coverage. Reinsurance plans are devised and executed after taking into consideration the Company’s risk tolerance. Please refer to Note 38(9) for retention limits of each insurance category.

  • 56 -

(6) Asset and liability management

The Company’s insurance liabilities are of short-term nature, which makes liquidity the primary concern in asset and liability management. The Company has identified three liquidity levels: Normal, Cautious and Critical based on the liquidity ratio, and applied different management practices for each of the above levels. The Company tries to maintain liquidity within the Normal level at all times. Any sign of liquidity deteriorating to the Cautious level (before the Critical level) must be reported with asset positions reviewed immediately, followed by a reassessment of asset allocation if necessary. If liquidity deteriorates to the Critical level, an emergency response meeting must be convened immediately to discuss possible solutions.

  1. Disclosure of insurance contract-related information

  2. (1) Insurance contract receivables and payables: Receivables

Receivables
Fire Insurance
Marine insurance
Automobile Insurance
Engineering insurance
Other insurance
Less: loss provisions
Net amount
Insurance category
Fire Insurance
Marine insurance
Automobile Insurance
Engineering insurance
Other insurance
Less: loss provisions
Net amount
Fire Insurance
Marine insurance
Automobile Insurance
Engineering insurance
Other insurance
Less: loss provisions
Net amount		 September 30,2020
Notes receivable
Premiums
receivable
$ 8,434
$ 137,725
34,614
40,193
91,710
55,307
1,282
6,485
7,849
67,310
143,889
307,020
(
3,605)
(
39,740)
$ 140,284
$ 267,280
December 31,2019		 Total
( ( $ 146,159
74,807
147,017
7,767
75,159
450,909

43,345)
$ 407,564
Notes receivable
Premiums
receivable
$ 8,908
$ 106,686
29,028
35,254
97,810
56,820
409
19,388
4,612
100,685
140,767
318,833
(
3,573)
(
40,306)
$ 137,194
$ 278,527
September 30,2019		 Total
( ( $ 115,594
64,282
154,630
19,797
105,297
459,600

43,879)
$ 415,721
Notes receivable
$ 10,764
34,142
85,898
1,317
8,352
140,473
(
3,534)
$ 136,939		 Premiums
receivable
$ 179,401
54,448
60,685
7,430
84,514
386,478

40,664)
$ 345,814		 Total
( ( ( $ 190,165
88,590
146,583
8,747
92,866
526,951

44,198)
$ 482,753
  • 57 -

Commission payable

Commission payable
Class
Fire Insurance
Marine insurance
Automobile Insurance
Engineering insurance
Other insurance
Total		 September 30,
2020
$ 15,416
7,540
54,955
1,488
20,153
$ 99,552		 December 31,
2019
$ 12,148
6,992
68,042
1,158
21,822
$ 110,162		 September 30,
2019
$ 16,036
9,414
55,293
1,655
23,050
$ 105,448

Reinsurance accounts receivable (payable) - retained reinsurance

MAT
CMP
CRC
WIL
Others
Less: loss provisions
Net amount
MAT
CRC
CMP
WIL
FPH
Others
Less: loss provisions
Net amount
MAT
CMP
CRC
WOC
WRT
Others
Less: loss provisions
Net amount		 September 30,2020 September 30,2020 September 30,2020
Reinsurance
accounts receivable
Reinsurance
accountspayable
$ 88,688
$ 21,947
46,100
75,951
16,123
129,354
12,726
24,804
40,480
157,457
(
2,382)
-
$ 201,735
$ 409,513
December 31,2019		 Reinsurance
accountspayable
(
Reinsurance
accounts receivable
Reinsurance
accountspayable
$ 74,186
$ 80,288
30,048
98,455
28,954
59,612
27,288
29,817
8,198
3,324
50,502
164,922
(
3,589)
-
$ 215,587
$ 436,418
September 30,2019		 Reinsurance
accountspayable
(
Reinsurance
accounts receivable
$ 100,425
32,428
30,367
18,120
13,208
66,712
(
1,207)
$ 260,053		 Reinsurance
accountspayable
( $ 80,847
61,112
127,746
325
16,515
175,041
-
$ 461,586
  • 58 -
(2)
Unearned premium reserve
1.
Details of unearned premium reserve:
Class
September 30,
2020
One-year commercial
fire insurance
$ 228,247
General automobile
hull insurance for
private vehicle
957,155
General automobile
liabilities insurance
for private vehicle
872,805
Mandatory automobile
liabilities insurance
for private vehicle
257,616
Personal accident
insurance
330,087
Others
1,204,521
$ 3,850,431		 December 31,
2019
$ 193,492
914,858
836,070
255,166
397,695
1,129,378
$ 3,726,659		 September 30,
2019		 September 30,
2019
$ 246,722
862,687
794,923
254,346
476,804
1,307,030
$ 3,942,512

Due to the extensive range of insurance categories involved, only categories that represented more than 5% of outstanding balance were presented above.

  1. Details of retained unearned premium reserve:
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 September30,2020 September30,2020 September30,2020
Unearned premium reserve
Direct
insurance
(1)
Assumed
reinsurance
(2)
$ 601,185
$ 37,054
84,949
1,829
2,241,373
145,221
223,570
22,476
331,746
2,197
146,673
12,158
$ 3,629,496
$ 220,935		 Ceded unearned
premium
reserve
Ceded
reinsurance
(Note)(3)
$ 292,300
47,708
364,401
108,868
130,800
59,547
$ 1,003,624		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
insurance
(1)
$ 601,185
84,949
2,241,373
223,570
331,746
146,673
$ 3,629,496
$ 345,939
39,070
2,022,193
137,178
203,143
99,284
$ 2,846,807
  • 59 -
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 December31,2019 December31,2019 December31,2019
Ceded unearned
premium
reserve
Unearned premium reserve
Direct
insurance
(1)
Assumed
reinsurance
(2)
Ceded
reinsurance
(Note)(3)
$ 556,443
$ 31,493
$ 302,532
72,767
2,061
37,876
2,153,139
146,807
356,645
218,126
22,934
110,827
405,792
1,832
231,408
104,579
10,686
38,164
$ 3,510,846
$ 215,813
$ 1,077,452
September 30,2019		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
insurance
(1)
$ 556,443
72,767
2,153,139
218,126
405,792
104,579
$ 3,510,846		 $ 285,404
36,952
1,943,301
130,233
176,216
77,101
$ 2,649,207
Unearnedpremium reserve
Direct
insurance
(1)
Assumed
reinsurance
(2)
$ 663,376
$ 34,090
100,180
3,996
2,069,328
145,913
226,105
24,205
527,214
1,872
132,637
13,596
$ 3,718,840
$ 223,672		 Ceded unearned
premium
reserve
Ceded
reinsurance
(Note)(3)
$ 343,329
51,733
345,448
111,663
344,025
48,750
$ 1,244,948		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
insurance
(1)
$ 663,376
100,180
2,069,328
226,105
527,214
132,637
$ 3,718,840		 $ 354,137
52,443
1,869,793
138,647
185,061
97,483
$ 2,697,564

Note: Presented as reinsurance contract assets.

  1. Changes in unearned premium reserve and ceded unearned reserve:
Item
Opening amount
Provisions in the current
period
Recoveries in the current
period
Closing amount		 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020
Unearned premium
reserve
$ 3,726,659
3,850,431
(
3,726,659)
$ 3,850,431		 Ceded unearned
premium reserve
( ( $ 1,077,452
1,003,624

1,077,452)
$ 1,003,624
  • 60 -
January1 to September 30,2019
Item
Unearned premium
reserve
Ceded unearned
premium reserve
Opening amount
$ 4,032,127
$ 1,391,535
Provisions in the current
period
3,942,512
1,244,948
Recoveries in the current
period
(
4,032,127)
(
1,391,535)
Closing amount
$ 3,942,512
$ 1,244,948
(3)
Claim reserve
1.
Details of claim reserve:
Class
September 30,
2020
December 31,
2019
September 30,
2019
One-year commercial
fire insurance
$ 252,646
$ 303,266
$ 557,514
General automobile
hull insurance for
private vehicle
232,641
215,473
568,107
General automobile
liabilities insurance
for private vehicle
598,804
605,136
400,880
Mandatory
automobile
liabilities insurance
for private vehicle
427,202
481,165
231,310
Mandatory
motorcycle
liabilities insurance
136,597
150,177
208,925
General liabilities
insurance
226,923
204,552
157,069
Personal accident
insurance
128,193
108,641
90,657
Others
379,203
422,823
398,841
$ 2,382,209
$ 2,491,233
$ 2,613,303		 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019
Ceded unearned
premium reserve
( $ 1,391,535
1,244,948

1,391,535)
$ 1,244,948
September 30,
2019
$ 557,514
568,107
400,880
231,310
208,925
157,069
90,657
398,841
$ 2,613,303

Due to the extensive range of insurance categories involved, only categories that represented more than 5% of outstanding balance were presented above.

  • 61 -

2. Details of retained claim reserve:

Reported but not paid
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/ liability
insurance
Accident/ health
insurance
Other insurance
Not reported
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/ liability
insurance
Accident/ health
insurance
Other insurance
Reported but not paid
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/ liability
insurance
Accident/ health
insurance
Other insurance
Not reported
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/ liability
insurance
Accident/ health
insurance
Other insurance		 September 30, 2020 September 30, 2020 September 30, 2020
Claim r es erve
Ceded claim
reserve
Assumed
reinsurance
(2)
Ceded
reinsurance
(Note)(3)
$ 2,900
$ 138,377
-
7,063
42,094
106,418
1,547
110,131
30
12,002
41,901
14,853
88,472
388,844
1,196
7
-
5,410
150,146
232,611
711
20,243
12
46,318
103
8,097
152,168
312,686
$ 240,640
$ 701,530
December 31, 2019		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
underwritten
insurance
(1)
$ 287,530
35,286
686,668
238,629
24,940
41,884
1,314,937
4,595
10,896
637,392
49,400
105,888
18,461
826,632
$ 2,141,569
$ 152,053
28,223
622,344
130,045
12,968
68,932
1,014,565
5,784
5,486
554,927
29,868
59,582
10,467
666,114
$ 1,680,679
Claim r es erve
Assumed
reinsurance
(2)
$ 815
806
40,565
12,244
-
3,413
57,843
277
-
149,708
4,756
-
1,382
156,123
$ 213,966		 Ceded claim
reserve
Ceded
reinsurance
(Note)(3)
$ 172,105
7,609
109,857
124,539
7,900
16,706
438,716
23
13,026
270,406
18,495
55,212
7,256
364,418
$ 803,134		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
underwritten
insurance
(1)
$ 342,255
39,319
693,735
248,831
16,590
47,439
1,388,169
2,753
20,830
691,511
45,754
111,320
16,930
889,098
$ 2,277,267
$ 170,965
32,516
624,443
136,536
8,690
34,146
1,007,296
3,007
7,804
570,813
32,015
56,108
11,056
680,803
$ 1,688,099
  • 62 -
Reported but not paid
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/ liability
insurance
Accident/ health
insurance
Other insurance
Not reported
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/ liability
insurance
Accident/ health
insurance
Other insurance		 September 30,2019 September 30,2019 September 30,2019
Claim r es erve
Assumed
reinsurance
(2)
$ 3,170
840
38,739
11,777
9
3,503
58,038
997
-
148,123
3,982
3
1,224
154,329
$ 212,367		 Ceded claim
reserve
Ceded
reinsurance
(Note)(3)
$ 213,714
9,086
145,789
125,360
7,132
17,834
518,915
40
12,019
281,192
30,557
57,476
7,053
388,337
$ 907,252		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
underwritten
insurance
(1)
$ 433,642
24,689
749,073
241,073
11,240
51,941
1,511,658
3,332
19,651
683,042
66,817
102,219
14,217
889,278
$ 2,400,936
$ 223,098
16,443
642,023
127,490
4,117
37,610
1,050,781
4,289
7,632
549,973
40,242
44,746
8,388
655,270
$ 1,706,051

Note: Presented as reinsurance contract assets.

3. Net change in claim reserves and net change in ceded claim reserves

Reported but
not paid
Fire Insurance
Marine
insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance
Not reported
Fire Insurance
Marine
insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020
Direct underwr itt en insurance Assumed r ei nsurance Net change in
claim reserves
(5)=(1)-(2)
+(3)-(4)		 Ceded rei ns urance Net change in
ceded claim
reserve
(8)=(6)-(7)
Provisions(1) Recoveries(2) Provisions(3) Recoveries(4) Provisions(6) Recoveries(7)
$ 287,530
35,286
686,668
238,629
24,940
41,884
1,314,937
4,595
10,896
637,392
49,400
105,888
18,461
826,632
$ 2,141,569		 $ 342,255
39,319
693,735
248,831
16,590
47,439
1,388,169
2,753
20,830
691,511
45,754
111,320
16,930
889,098
$ 2,277,267		 $ 2,900
-
42,094
1,547
30
41,901
88,472
1,196
-
150,146
711
12
103
152,168
$ 240,640		 $ 815
806
40,565
12,244
-
3,413
57,843
277
-
149,708
4,756
-
1,382
156,123
$ 213,966		 ($ 52,640)
(
4,839)
(
5,538)
(
20,899)
8,380
32,933
(
42,603)
2,761
(
9,934)
(
53,681)
(
399)
(
5,420)
252
(
66,421)
($ 109,024)		 $ 138,377
7,063
106,418
110,131
12,002
14,853
388,844
7
5,410
232,611
20,243
46,318
8,097
312,686
$ 701,530		 $ 172,105
7,609
109,857
124,539
7,900
16,706
438,716
23
13,026
270,406
18,495
55,212
7,256
364,418
$ 803,134		 ($ 33,728)
(
546)
(
3,439)
(
14,408)
4,102
(
1,853)
(
49,872)
(
16)
(
7,616)
(
37,795)
1,748
(
8,894)
841
(
51,732)
($ 101,604)
  • 63 -
Reported but not
paid
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/ health
insurance
Other insurance
Not reported
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/ health
insurance
Other insurance		 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019
Direct underwr itt en insurance Assumed r ei nsurance Net change in
claim reserves
(5)=(1)-(2)
+(3)-(4)		 Ceded rei ns urance Net change in
ceded claim
reserve
(8)=(6)-(7)
Provisions(1) Recoveries(2) Provisions(3) Recoveries(4) Provisions(6) Recoveries(7)
$ 433,642
24,689
749,073
241,073
11,240
51,941
1,511,658
3,332
19,651
683,042
66,817
102,219
14,217
889,278
$ 2,400,936		 $ 567,654
166,107
677,158
216,752
6,927
78,219
1,712,817
5,011
7,536
790,629
34,078
79,866
9,050
926,170
$ 2,638,987		 $ 3,170
840
38,739
11,777
9
3,503
58,038
997
-
148,123
3,982
3
1,224
154,329
$ 212,367		 $ 2,786
317
38,798
15,189
-
3,615
60,705
778
-
144,849
3,764
-
1,117
150,508
$ 211,213		 ($ 133,628)
(
140,895)
71,856
20,909
4,322
(
26,390)
(
203,826)
(
1,460)
12,115
(
104,313)
32,957
22,356
5,274
(
33,071)
($ 236,897)		 $ 213,714
9,086
145,789
125,360
7,132
17,834
518,915
40
12,019
281,192
30,557
57,476
7,053
388,337
$ 907,252		 $ 303,826
110,318
113,584
99,499
3,260
23,778
654,265
297
414
348,212
4,050
38,903
2,856
394,732
$ 1,048,997		 ($ 90,112)
(
101,232)
32,205
25,861
3,872
(
5,944)
(
135,350)
(
257)
11,605
(
67,020)
26,507
18,573
4,197
(
6,395)
($ 141,745)

Changes in claim reserves and ceded claim reserves:

Item
Opening amount
Provisions in the current period
Recoveries in the current period
Closing amount
Item
Opening amount
Provisions in the current period
Recoveries in the current period
Closing amount		 January1 to September 30,2020 January1 to September 30,2020 January1 to September 30,2020
Claim reserve
Ceded claim reserve
$ 2,491,233
$ 803,134
2,382,209
701,530
(
2,491,233)
(
803,134)
$ 2,382,209
$ 701,530
January1 to September 30,2019
(
Claim reserve
$ 2,850,200
2,613,303
(
2,850,200)
$ 2,613,303		 Ceded claim reserve
$ 1,048,997
907,252
(
1,048,997)
$ 907,252
( $ 1,048,997
907,252

1,048,997)
$ 907,252

(4) Special claim reserve

  1. Details of special claim reserve:
Nature
Major incident
Change of risk		 Class September 30,
2020
$ 87,801
61,485
149,286
71,562
(
98,766 )
525,066
74,687
587,411
184,082
197,532
1,541,574
$1,690,860		 December 31,
2019		 December 31,
2019		 September 30,
2019		 September 30,
2019
Commercial earthquake
insurance
Typhoon and flood insurance
Mandatory automobile
liabilities insurance for
private vehicle
Mandatory commercial
automobile liabilities
insurance
Mandatory motorcycle
liabilities insurance
Nuclear risks insurance
Commercial earthquake
insurance
Typhoon and flood insurance
Government-regulated
earthquake insurance		 ( ( $ 90,760
63,558
154,318
35,881
102,353 )
538,007
74,687
587,411
184,083
197,531
1,515,247
$1,669,565		 ( $ 91,747
64,249
155,996
29,477
106,182 )
550,741
74,687
587,411
184,082
197,532
1,517,748
$1,673,744

  • 64 -

  • Details of special claim reserve - mandatory automobile/motorcycle liabilities insurance:

insurance:
Item
Opening amount
Provisions in the current period
Recoveries in the current period
Closing amount		 January 1 to
September 30,2020
$ 471,535
39,269
(
12,942)
$ 497,862		 January 1 to
September 30,2019
( ( $ 470,860
13,269
10,093)
$ 474,036

3. Special claim reserve - voluntary automobile/motorcycle liabilities insurance January 1 to September 30, 2020

Item
Opening
amount
Recoveries
in the
current
period
Closing
amount
Item
Opening
amount
Recoveries
in the
current
period
Closing
amount		 Liabilities Liabilities Special reserve
Major incident
$ 154,318
(
5,032)
$ 149,286		 Change of risk
$1,043,712
-
$1,043,712		 Change of risk
$ 1,111,909
-
$ 1,111,909		 Total
( $1,681,701
-
$1,681,701
Liabilities Total
$1,204,740

5,032)
$1,199,708		 Special reserve
Major incident
$ 161,028
(
5,032)
$ 155,996		 Change of risk
$1,043,712
-
$1,043,712		 Major incident
$ 504,170
-
$ 504,170		 Change of risk
$ 970,079
-
$ 970,079		 Total
( ( $1,474,249
-
$1,474,249

  • Note 1: “Notes on Natural Disaster Insurance (Commercial Earthquake Insurance and Typhoon/Flood Insurance) Reserve Enhancement for Non-life Insurance Companies” issued by the competent authority in Jin-Guan-Bao-Cai-Zi No. 10102515061 dated November 9, 2012 permitted the reclassification of special claim reserves for major incidents to special claim reserves for change of risk. The Company had yet to make full provision of special claim reserves for commercial earthquake and Typhoon/flood insurance at that time, and was therefore unable to reclassify balances to special reserves.

  • Note 2: If the Company had not adopted “Notes on Natural Disaster Insurance (Commercial Earthquake Insurance and Typhoon/Flood Insurance) Reserve Enhancement, Notes on Residential Earthquake Coinsurance Members’ Reserves, and Rules on Nuclear Risks Insurance Reserves for Non-life Insurance Companies,” the amount of Insurance liability - Special claim reserve would have decreased by NT$954,398,000 (net of NT$238,600,000 tax impact) against an increase in special reserve of the same amount as of September 30, 2020; meanwhile, net income for the period from January 1 to September 30, 2020 would have fallen by NT$4,026,000 and earnings per share would have reduced by NT$0.01.

  • 65 -

(5) Deficiency reserve Details of deficiency reserve:

September 30, 2020

September 30,2020 September 30,2020 September 30,2020
Aviation
Insurance
Professional
liability
insurance
Fishing Vessel
Insurance
Vessel hull
insurance
Health
Insurance
Engineering
insurance
Aviation
Insurance
Professional
liability
insurance
Fishing Vessel
Insurance
Vessel hull
insurance
Health
Insurance
Engineering
insurance		 Deficiencyreserve
Deficiency
reserve for
ceded
coverage
Direct
insurance
(1)
Assumed
reinsurance
(2)
Ceded
reinsurance
(3)
$ 7,599
$ -
$ -
2,255
14
-
10,450
284
9,784
1,031
-
-
520
-
-
5,638
6,851
-
$ 27,493
$ 7,149
$ 9,784
December 31,2019		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
insurance
(1)
$ 7,599
2,255
10,450
1,031
520
5,638
$ 27,493
$ 7,599
2,269
950
1,031
520
12,489
$ 24,858
Deficiencyreserve
Direct
insurance
(1)
Assumed
reinsurance
(2)
$ 1,424
$ -
2,376
18
8,035
307
605
-
368
-
5,153
6,007
$ 17,961
$ 6,332		 Deficiency
reserve for
ceded
coverage
Ceded
reinsurance
(3)
$ -
-
7,564
-
-
-
$ 7,564		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
insurance
(1)
$ 1,424
2,376
8,035
605
368
5,153
$ 17,961
$ 1,424
2,394
778
605
368
11,160
$ 16,729
  • 66 -
Aviation
Insurance
Typhoon and
flood insurance
Fishing Vessel
Insurance
Vessel hull
insurance
Health
Insurance
Engineering
insurance		 September 30,2019 September 30,2019 September 30,2019
Deficiencyreserve
Direct
insurance
(1)
Assumed
reinsurance
(2)
$ 4,194
$ -
12,216
1,307
9,552
177
673
-
546
-
3,140
3,781
$ 30,321
$ 5,265		 Deficiency
reserve for
ceded
coverage
Ceded
reinsurance
(3)
$ -
-
9,133
-
-
-
$ 9,133		 Retained
insurance
(4)=(1)+(2)-(3)
Direct
insurance
(1)
$ 4,194
12,216
9,552
673
546
3,140
$ 30,321
$ 4,194
13,523
596
673
546
6,921
$ 26,453

Note: Deficiency reserve for ceded coverage is presented under reinsurance contract assets.

(6) Retained earned premium revenue

The following shows amount and calculation of retained earned gross premiums for the Company’s mandatory and voluntary automobile liabilities insurance for the period January 1 to September 30, 2020:

Class
Mandatory automobile
liabilities insurance
Voluntary automobile
liabilities insurance		 Premium
revenues
(1)
$ 582,604
4,718,791
$ 5,301,395		 Reinsurance
Premium
(2)
$ 192,177
114,604
$ 306,781		 Reinsurance
premiums
expense
(3)
$ 243,634
1,124,839
$ 1,368,473		 Retained
premium
(4)=(1)+(2)-(3)		 Retained
premium
(4)=(1)+(2)-(3)
$ 531,147
3,708,556
$ 4,239,703

For voluntary automobile liabilities insurance, a sum of NT$9,438,000 was contributed to the stabilization fund using applicable percentages for the period January 1 to September 30, 2020.

  • 67 -
Net change in Net change in
unearned
premium
Direct written insurance Assumed reinsurance unearned reserve
unearnedpremium reserve premium reserve (9)=(5)-(6)
Class Provisions (5) Recoveries(6) Provisions(7) Recoveries(8) +(7)-(8)
Mandatory
automobile
liabilities
insurance $ 309,202 $ 309,040 $ 145,221 $ 146,807 ($ 1,424)
Voluntary
automobile
liabilities
insurance 3,320,294 3,201,806 75,714 69,006 125,196
$ 3,629,496 $ 3,510,846 $ 220,935 $ 215,813 $ 123,772
Net change in
ceded unearned Retained earned
Ceded reinsurance unearned premium reserve gross premium
premium reserve (12)= (13)=
Item Provisions(10) Recoveries(11) (10)-(11) (4)-(9)+(12)
Mandatory automobile
liabilities insurance		 $ 185,542 $ 185,437 $ 105 $ 532,676
Voluntary automobile
liabilities insurance		 818,082 892,015 ( 73,933) 3,509,427
$ 1,003,624 $ 1,077,452 ( $ 73,828) $ 4,042,103

The following shows amount and calculation of retained earned gross premiums for the Company’s mandatory and voluntary automobile liabilities insurance for the period January 1 to September 30, 2019:

Class
Mandatory automobile
liabilities insurance
Voluntary automobile
liabilities insurance		 Premium
revenues
(1)
$ 580,352
4,653,623
$ 5,233,975		 Reinsurance
Premium
(2)
$ 194,711
116,751
$ 311,462		 Reinsurance
premiums
expense
(3)
$ 241,436
1,250,393
$ 1,491,829		 Retained
premium
(4)=(1)+(2)-(3)		 Retained
premium
(4)=(1)+(2)-(3)
$ 533,627
3,519,981
$ 4,053,608

For voluntary automobile liabilities insurance, a sum of NT$9,307,000 was contributed to the stabilization fund using applicable percentages for the period January 1 to September 30, 2019.

Class
Mandatory
automobile
liabilities
insurance
Voluntary
automobile
liabilities
insurance		 Direct written insurance
unearnedpremium reserve
Provisions(5)
Recoveries(6)
$ 309,821
$ 319,204
3,409,019
3,505,321
$ 3,718,840
$ 3,824,525		 Direct written insurance
unearnedpremium reserve
Provisions(5)
Recoveries(6)
$ 309,821
$ 319,204
3,409,019
3,505,321
$ 3,718,840
$ 3,824,525		 Assumed reinsurance unearned
premium reserve
Provisions(7)
Recoveries(8)
$ 145,912
$ 144,164
77,760
63,438
$ 223,672
$ 207,602		 Assumed reinsurance unearned
premium reserve
Provisions(7)
Recoveries(8)
$ 145,912
$ 144,164
77,760
63,438
$ 223,672
$ 207,602		 Net change in
unearned
premium
reserve
(9)=(5)-(6)
+(7)-(8)
Provisions(5)
$ 309,821
3,409,019
$ 3,718,840		 Provisions(7)
$ 145,912
77,760
$ 223,672
($ 7,635)
(
81,980)
($ 89,615)
  • 68 -
Item Ceded reinsurance unearned
premium reserve
Provisions (10)
Recoveries (11)
$ 185,908
$ 191,527
1,059,040
1,200,008
$ 1,244,948
$ 1,391,535		 Ceded reinsurance unearned
premium reserve
Provisions (10)
Recoveries (11)
$ 185,908
$ 191,527
1,059,040
1,200,008
$ 1,244,948
$ 1,391,535		 Net change in
ceded unearned
premium reserve
(12)=
(10)-(11)
( $ 5,619 )
(
140,968)
($ 146,587)		 Retained earned
gross premium
(13)=
(4)-(9)+(12)		 Retained earned
gross premium
(13)=
(4)-(9)+(12)
Provisions (10)
$ 185,908
1,059,040
$ 1,244,948
Mandatory automobile
liabilities insurance
Voluntary automobile
liabilities insurance		 (
(
(		 $ 535,643
3,460,993
$ 3,996,636

(7) Retained claims

The following shows amount and calculation of retained claims for the Company’s mandatory and voluntary automobile liabilities insurance for the period January 1 to September 30, 2020:

Class Insurance claims
(including
claim-related
expenses)
(1)
$ 409,898
2,316,607
$ 2,726,505		 Claims paid for
reinsurance
(2)
$ 194,778
20,754
$ 215,532		 Claims
recovered from
reinsurers
(3)
$ 245,789
483,123
$ 728,912		 Retained claims
(4)=(1)+(2)-(3)		 Retained claims
(4)=(1)+(2)-(3)
Mandatory automobile
liabilities insurance
Voluntary automobile
liabilities insurance		 $ 358,887
1,854,238
$ 2,213,125

The following shows amount and calculation of retained claims for the Company’s mandatory and voluntary automobile liabilities insurance for the period January 1 to September 30, 2019:

Insurance claims


Insurance claims
Class (including
claim-related
expenses)
(1)
$ 461,895
2,546,101
$ 3,007,996		 Claims paid for
reinsurance
(2)
$ 181,266
59,674
$ 240,940		 Claims
recovered from
reinsurers
(3)
$ 269,835
727,292
$ 997,127		 Retained claims
(4)=(1)+(2)-(3)
Mandatory automobile
liabilities insurance
Voluntary automobile
liabilities insurance		 $ 373,326
1,878,483
$ 2,251,809

(8) Policyholders’ reported claims liability

Policyholders’ reported and paid/unpaid and unreported claims liability: September 30, 2020

September 30,2020 30,2020
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/ health
insurance
Other insurance		 Insurance
claimspayable
Reported but
notpaid
$ 290,430
35,286
728,762
240,176
24,970
83,785
$ 1,403,409		 Claim reserves
Reported and
paid		 Not reported Total
$ -
-
172
-
-
1,614
$ 1,786		 $ 5,791
10,896
787,538
50,111
105,900
18,564
$ 978,800		 $ 296,221
46,182
1,516,300
290,287
130,870
102,349
$ 2,382,209
  • 69 -

December 31, 2019

Insurance
claimspayable
Claim reserves
Reported and
paid
Reported but
notpaid
Not reported
Total
Fire Insurance
$ -
$ 343,070
$ 3,030
$ 346,100
Marine insurance
-
40,125
20,830
60,955
Automobile
Insurance
-
734,300
841,219
1,575,519
Engineering/
liability insurance
-
261,075
50,510
311,585
Accident/ health
insurance
-
16,590
111,320
127,910
Other insurance
-
50,852
18,312
69,164
$ -
$ 1,446,012
$ 1,045,221
$ 2,491,233
September30,2019
Insurance
claims payable
Claim reserves
Reported and
paid
Reported but
notpaid
Not reported
Total
Fire Insurance
$ -
$ 436,812
$ 4,329
$ 441,141
Marine insurance
-
25,529
19,651
45,180
Automobile
Insurance
4
787,812
831,165
1,618,977
Engineering/
liability insurance
10
252,850
70,799
323,649
Accident/ health
insurance
-
11,249
102,222
113,471
Other insurance
1,715
55,444
15,441
70,885
$ 1,729
$ 1,569,696
$ 1,043,607
$ 2,613,303
Reinsurance contract asset - claims recoverable from reinsurers for obligatory
payments made to policyholders
September 30,
2020
December 31,
2019
September 30,
2019
Class
Actualpayments
Actualpayments
Actualpayments
Fire Insurance
$ 1,250
$ 4,968
$ 2,961
Marine insurance
3,669
17,977
49,508
Automobile Insurance
77,636
76,637
74,067
Engineering/ liability
insurance
10,922
11,682
14,899
Accident/ health
insurance
37,363
49,562
82,659
Other insurance
2,371
6,266
3,795
Subtotal
133,211
167,092
227,889
Less: allowance for
bad debt
(
736)
(
1,010)
(
3,038)
Net amount
$ 132,475
$ 166,082
$ 224,851		 Insurance
claimspayable
Reported and
paid
$ -
-
-
-
-
-
$ -		 Insurance
claimspayable
Reported and
paid
$ -
-
-
-
-
-
$ -		 Insurance
claimspayable
Reported and
paid
$ -
-
-
-
-
-
$ -		 Insurance
claimspayable
Reported and
paid
$ -
-
-
-
-
-
$ -		 Claim reserves Claim reserves Claim reserves
Reported but
notpaid
$ 343,070
40,125
734,300
261,075
16,590
50,852
$ 1,446,012
September30,		 Not reported
$ 3,030
20,830
841,219
50,510
111,320
18,312
$ 1,045,221
2019		 Total
$ -
-
-
-
-
-
$ -
Claim reserves
$
$
  • 70 -

Reinsurance contract asset - please refer to Note 38(3) for the amount of ceded claim reserve provided on policyholders’ reported and unpaid and unreported claims liability.

(9) Retention limits by insurance category

Class
Fire Insurance
Engineering insurance
Liabilities insurance
Cargo insurance
Vessel hull insurance
Fishing Vessel Insurance
Automobile hull insurance
Automobile third-party liability
insurance (per incident)
Automobile
passenger
liability
insurance (per incident)
Personal accident insurance
Health insurance		 January 1 to
September 30, 2020
$ 250,000
250,000
150,000
75,000
60,000
60,000
13,800
202,400
644,000
30,000
2,000		 January 1 to
September 30, 2019
$ 250,000
250,000
150,000
75,000
60,000
60,000
13,800
202,400
644,000
30,000
2,000
  • (10) Acquisition costs for insurance contracts

January 1 to September 30, 2020

Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/ health
insurance
Other insurance
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/ health
insurance
Other insurance		 Commission
Expenses		 Commission
Expenses		 Total
$ 66,962
25,584
569,953
44,564
81,845
19,802
$ 808,710
Commission
Expenses		 Service
Charges
$ -
-
103,735
-
-
-
$ 103,735		 Reinsurance
commission
expense
$ 3,342
780
-
8,546
115
1,899
$ 14,682		 Total
$ 69,538
27,452
449,335
44,194
83,467
20,825
$ 694,811		 $ 72,880
28,232
553,070
52,740
83,582
22,724
$ 813,228

None of the insurance contract acquisition cost above was recognized on a deferred basis.

  • 71 -

(11) Insurance profitability analysis Profitability analysis for direct underwritten insurance:

January 1 to September 30, 2020

Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 Premium
revenues
(1)		 Net change in
unearned
premium
reserve
(2)		 Acquisition
costs for
insurance
contracts
(3)		 Insurance
claims
(including
claim-related
expenses)
(4)		 Insurance
claims
(including
claim-related
expenses)
(4)		 Net change in
claim reserves
(5)		 Profit (loss) on
insurance
(6)=(1)-(2)-
(3)-(4)-(5)		 Profit (loss) on
insurance
(6)=(1)-(2)-
(3)-(4)-(5)
$ 762,656
246,669
3,413,257
260,917
395,859
222,037
$ 5,301,395		 $ 44,742
12,182
88,234
5,444
(
74,046)
42,094
$ 118,650		 $ 63,792
25,113
569,953
36,584
81,724
17,942
$ 795,108		 $ 127,073
90,328
2,080,870
104,121
271,254
52,859
$ 2,726,505		 ( $ 52,883)
(
13,967)
(
61,186)
(
6,556)
2,918
(
4,024)
($ 135,698)		 $ 579,932
133,013
735,386
121,324
114,009
113,166
$ 1,796,830

January 1 to September 30, 2019

Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 Premium
revenues
(1)		 Net change in
unearned
premium
reserve
(2)		 Acquisition
costs for
insurance
contracts
(3)		 Insurance
claims
(including
claim-related
expenses)
(4)		 Insurance
claims
(including
claim-related
expenses)
(4)		 Net change in
claim reserves
(5)		 Profit (loss) on
insurance
(6)=(1)-(2)-
(3)-(4)-(5)		 Profit (loss) on
insurance
(6)=(1)-(2)-
(3)-(4)-(5)
$ 789,375
295,544
3,199,603
280,750
463,504
205,199
$ 5,233,975		 $ 19,647
3,417
3,648
(
7,065)
(
158,212)
32,880
($ 105,685)		 $ 69,538
27,452
553,070
44,194
83,467
20,825
$ 798,546		 $ 191,750
286,206
2,063,094
103,506
336,232
27,208
$ 3,007,996		 ( $ 135,691)
(
129,303)
(
35,672)
57,060
26,666
(
21,111)
($ 238,051)		 $ 644,131
107,772
615,463
83,055
175,351
145,397
$ 1,771,169

Profitability analysis for assumed reinsurance:

January 1 to September 30, 2020

Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 Reinsurance
Premium
(1)		 Net change in
unearned
premium
reserve
(2)		 Reinsurance
commission
expense
(3)		 Claims paid
for
reinsurance
(4)		 Net change in
claim reserves
(5)		 Profit (loss) on
assumed
reinsurance
(6)=(1)-(2)-
(3)-(4)-(5)
$ 55,102
4,806
192,177
33,224
3,285
18,187
$ 306,781		 $ 5,561
(
232)
(
1,586)
(
458)
365
1,472
$ 5,122		 $ 3,170
471
-
7,980
121
1,860
$ 13,602		 $ 1,480
6,311
194,778
11,465
441
1,057
$ 215,532		 $ 3,004
(
806)
1,967
(
14,742)
42
37,209
$ 26,674		 $ 41,887
(
938)
(
2,982)
28,979
2,316
(
23,411)
$ 45,851
  • 72 -
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019 January1 to September 30,2019
Reinsurance
Premium
(1)		 Net change in
unearned
premium
reserve
(2)		 Reinsurance
commission
expense
(3)		 Claims paid
for
reinsurance
(4)		 Net change in
claim reserves
(5)		 Profit (loss) on
assumed
reinsurance
(6)=(1)-(2)-
(3)-(4)-(5)
$ 48,855
7,751
194,711
37,698
2,759
19,688
$ 311,462		 $ 3,518
115
1,765
3,229
137
7,306
$ 16,070		 $ 3,342
780
-
8,546
115
1,899
$ 14,682		 $ 7,090
6,365
181,266
45,237
218
764
$ 240,940		 $ 603
523
3,215
(
3,194)
12
(
5)
$ 1,154		 $ 34,302
(
32)
8,465
(
16,120)
2,277
9,724
$ 38,616

Current profit/loss recognized on ceded insurance contracts:

January 1 to September 30, 2020

Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 Reinsurance
premiums
expense
(1)		 Net change in
ceded
unearned
premium
reserve
(2)		 Reinsurance
commission
revenues
(3)		 Claims
recovered
from
reinsurers
(4)		 Net change in
ceded claim
reserve
(5)		 (Profit) loss on
ceded
reinsurance
(6)=(1)-(2)-
(3)-(4)-(5)		 (Profit) loss on
ceded
reinsurance
(6)=(1)-(2)-
(3)-(4)-(5)
$ 393,973
85,263
513,008
119,281
144,450
112,498
$ 1,368,473		 ( $ 10,232)
9,832
7,756
(
1,959)
(
100,608)
21,383
($ 73,828)		 $ 21,911
9,403
103,036
30,713
39,796
9,505
$ 214,364		 $ 58,366
6,499
410,794
49,931
183,974
19,348
$ 728,912		 ( $ 33,744)
(
8,162)
(
41,234)
(
12,660)
(
4,792)
(
1,012)
($ 101,604)		 $ 357,672
67,691
32,656
53,256
26,080
63,274
$ 600,629

January 1 to September 30, 2019

Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability
insurance
Accident/ health
insurance
Other insurance		 Reinsurance
premiums
expense
(1)		 Net change in
ceded
unearned
premium
reserve
(2)		 Reinsurance
commission
revenues
(3)		 Claims
recovered
from
reinsurers
(4)		 Net change in
ceded claim
reserve
(5)		 (Profit) loss on
ceded
reinsurance
(6)=(1)-(2)-
(3)-(4)-(5)
$ 430,109
108,285
487,359
133,042
230,726
102,308
$ 1,491,829		 ( $ 9,890)
12,036
(
10,259)
(
4,962)
(
146,831)
13,319
($ 146,587)		 $ 23,716
12,241
82,256
45,068
49,303
8,004
$ 220,588		 ( $ 109,758
162,572
427,051
61,505
236,875

634)
$ 997,127		 ( $ 90,369)
(
89,627)
(
34,815)
52,368
22,445
(
1,747)
($ 141,745)		 $ 396,894
11,063
23,126
(
20,937)
68,934
83,366
$ 562,446

(12) Information on insurance risks

1. Sensitivity analysis for insurance risks

The Company conducts sensitivity analysis on major assumptions that have the potential to affect claim reserves, such as average cost of claim, claim-related expenses and number of claim cases. Impacts on claim reserves are established by making reasonable and possible changes to one assumption while holding other major assumptions constant. For example, a change to the

  • 73 -

variable “average cost of claim” would result in a proportional change in claim reserves. Detailed analysis is presented below:

Average cost of claim September 30, 2020 September 30, 2020
Single-varia
ble change
5%		 Effect on gross
claims reserve
Increase
(decrease)
$ 88,416		 Effect on net
claims reserve		 Effect on
pre-tax profit
Increase
(decrease)
(
66,010 )		 Pre-tax effect
on owners’
equity
Increase
(decrease)		 Increase
(decrease)
$ 66,010 (
66,010 )

Note: The above analysis does not include mandatory automobile liabilities insurance, nuclear risks insurance, and government-regulated earthquake insurance.

  1. Explanation to concentration of insurance risks

The Company sets retention limits depending on the risks associated with individual insurance categories. Risks are transferred away through the use of reinsurance, which reduces concentration of insurance risks and the impacts they have on the Company. Risk concentration by business category is explained below:

explained below:
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/ health
insurance
Other insurance
Fire Insurance
Marine insurance
Automobile
Insurance
Engineering/
liability insurance
Accident/
health
insurance
Other insurance		 January1to September 30,2020
%
14.39
4.65
64.38
4.92
7.47
4.19
100.00
30,2019
%
15.08
5.65
61.13
5.36
8.86
3.92
100.00		 January1to September 30,2020
Direct written
premiums
$ 762,656
246,669
3,413,257
260,917
395,859
222,037
$ 5,301,395
January1to September		 Cumulative retained
premiums (Note)
$ 423,785
166,212
3,092,426
174,860
254,694
127,726
$ 4,239,703
January1to September		 %
10.00
3.92
72.94
4.12
6.01
3.01
100.00
30,2019
Direct written
premiums
$ 789,375
295,544
3,199,603
280,750
463,504
205,199
$ 5,233,975		 Cumulative retained
premiums (Note)
$ 408,121
195,010
2,906,955
185,406
235,537
122,579
$ 4,053,608		 %
10.07
4.81
71.72
4.57
5.81
3.02
100.00

Note: represents the sum of premium revenue, reinsurance premium revenue and reinsurance premium expense.

Claims trends

Trend analysis for claims on direct insurance is as follows:

Year of accident
≤2015
2016
2017
2018
2019
2020		 September 30,2020 September 30,2020
Year count
1 2
$ 31,120,332
3,768,046
3,138,851
3,575,988
3,090,387		 3 4
$ 31,172,925
3,755,040
3,150,617		 5
$ 31,141,265
3,742,509		 6
$ 30,978,975
3,518,890
2,844,485
3,350,844
2,878,243
2,043,630		 $ 31,172,606
3,753,540
3,155,289
3,580,640		 $ 31,147,909
  • 74 -

Note: The above table does not include mandatory automobile liabilities insurance, nuclear risks insurance, and government-regulated earthquake insurance. (13) Credit risk, liquidity risk and market risk of insurance contracts

  1. Credit risk of insurance contracts

All reinsurance contracts held by the Company are evaluated according to “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

With regards to ceded insurance as of September 30, 2020, the Company was required to disclose ceded claim reserve for reported and unpaid liability totaling NT$28,000 on the sum of marine hull insurance ceded to Tugu Insurance Company Ltd., a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

For the sum of accident insurance ceded to Trust International Insurance and Reinsurance Company B.S.C.(C).Trust Re Labuan Branch, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$71,000 and ceded claim reserve for reported and unpaid liability totaling NT$3,000.

In addition, the Company was required to make provisions for substandard reinsurance reserve of NT$102,000 (including NT$71,000 of claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months, and NT$31,000 of ceded claim reserve for reported and unpaid liability) when preparing regulatory reports; however, this NT$102,000 of additional reserve and liability does not affect the Company’s financial statements.

With regards to ceded insurance as of December 31, 2019, the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$59,000 and ceded claim reserve for reported and unpaid liability totaling NT$85,000 on the sum of marine hull insurance ceded to Tugu Insurance Company Ltd., a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

For the sum of commercial fire insurance ceded to ASIA CAPITAL REINSURANCE GROUP PTE LTD, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose substandard reinsurance premium expenses totaling NT$694,000.

For the sum of accident insurance ceded to Trust International Insurance and Reinsurance Company B.S.C.(C).Trust Re Labuan Branch, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$117,000 and ceded

  • 75 -

claim reserve for reported and unpaid liability totaling NT$38,000.

In addition, the Company was required to make provisions for substandard reinsurance reserve of NT$646,000 (including NT$347,000 of ceded unearned premium reserve, NT$176,000 of claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months, and NT$123,000 of ceded claim reserve for reported and unpaid liability) when preparing regulatory reports; however, this NT$646,000 of additional reserve and liability does not affect the Company’s financial statements.

With regards to ceded insurance as of September 30, 2019, the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$61,000 and ceded claim reserve for reported and unpaid liability totaling NT$212,000 on the sum of marine hull insurance ceded to Tugu Insurance Company Ltd., a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms.”

For the sum of accident insurance ceded to Trust International Insurance and Reinsurance Company B.S.C.(C).Trust Re Labuan Branch, a reinsurer that did not conform with the credit grading requirements stated in Article 8 of “Regulations Governing Insurance Enterprises Engaging in Operating Reinsurance and Other Risk Spreading Mechanisms,” the Company was required to disclose claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months totaling NT$1,848,000 and ceded claim reserve for reported and unpaid liability totaling NT$30,000.

In addition, the Company was required to make provisions for substandard reinsurance reserve of NT$2,151,000 (including NT$1,909,000 of claims recoverable from reinsurers for obligatory payments made to policyholders in the last 9 months, and NT$242,000 of ceded claim reserve for reported and unpaid liability) when preparing regulatory reports; however, this NT$2,151,000 of additional reserve and liability does not affect the Company’s financial statements.

  1. Liquidity risk of insurance contracts

The Company manages liquidity risk of its insurance contracts in three liquidity levels: Normal, Cautious and Critical. The Company’s liquidity position as of September 30, 2020 was considered to be at the Normal level, which posed no concern of liquidity risk.

3.

Market risk of insurance contracts

None of the insurance contracts and reinsurance contracts issued or held by the Company involved any significant market risk.

  • 76 -

  • (14) Assets, liabilities, revenues and costs of mandatory automobile liabilities insurance 1. Assets and liabilities of mandatory automobile liabilities insurance

(in NT$ 1,000)

(in NT$1,000
Item Amount Item Amount
Assets September 30,
2020		 December 31,
2019		 September 30,
2019		 Liabilities September 30,
2020		 December 31,
2019		 September 30,
2019
Cash and bank deposits
(Note)
Cash equivalents
Notes receivable
Premiums receivable
Claims recoverable from
reinsurers
Reinsurance
accounts
receivable
Other receivables
Financial assets at fair
value through other
comprehensive
income
Ceded
unearned
premium reserve
Ceded claim reserve
Payments in suspense
and pending settlement
Other assets
$ 1,088,698
-
14,880
12,190

20,136

67,397
-


-

185,542
253,423

-
-		 $ 1,089,353
-
8,511
16,055
23,744
50,416
-
-
185,437
296,837
-
-		 $ 1,130,063

-

8,496


11,230


22,452


53,752

524

-


185,908

348,350
460
-		 Notes payable
Claims payable
Claims
payable
to
reinsurers
Reinsurance
accounts
payable
Unearned
premium
reserve
Claim reserve
Special reserve
Receipts in suspense and
pending settlement
Other liabilities		 $ -
-
-
75,951
454,424
613,821
497,862
208
-		 $ -
-
-
59,612
455,847
683,359
471,535
-
-		 $ -
-
-
61,112
455,734
770,353
474,036
-
-
Total assets 1,642,266 $1,670,353 $1,761,235
 Total liabilities 1,642,266 $1,670,353 $1,761,235

  • Note: As of September 30, 2020, December 31, 2019 and September 30, 2019, NT$372,697,000, NT$373,353,000 and NT$414,063,000 of which were presented as cash, while NT$716,000,000, NT$716,000,000 and NT$716,000,000 of which were presented as other financial assets, respectively.

  • Revenues and costs of mandatory automobile liabilities insurance

(in NT$1,000) (in NT$1,000) (in NT$1,000) (in NT$1,000) (in NT$1,000) (in NT$1,000) (in NT$1,000) (in NT$1,000)
July 1 to
September 30,
2020
July 1 to
September 30,
2019
January 1 to
September 30,
2020		 January 1 to
September 30,
2019
Revenue
Pure premium revenues
Reinsurance Premium
Premium revenues
Less: reinsurance
premiums expense
Net change in unearned
premium reserve
Retained Earned Premium
Interest income
Total operating
revenues
Operating Cost
Insurance claims (including
reinsurance claims of
NT$63,452,000,
NT$50,133,000,
NT$194,778,000 and
NT$181,266,000,
respectively)
Less: claims recovered
from reinsurers
Retained claims
Net change in claim
reserves
Net change in special
claim reserves
Total operating costs		 (
(

(
(		 $ 139,408
65,133
204,541
83,650 )
877)
120,014
889
120,903
189,992
75,584)
114,408
1,070 )
7,565
120,903		 (


(

(		 $ 133,448
65,011
198,459
80,070 )
489
118,878
1,218
$ 120,096
$ 172,709
73,392)
99,317
24,285
3,506)
$ 120,096		 (
(
(		 $ 406,020
192,177
598,197
243,634 )
1,528
356,091
2,999
359,090
604,676
245,789)
358,887
26,124 )
26,327
359,090		 (
(
(		 $ 402,368
194,711
597,079
241,436 )
2,015
357,658
3,655
$ 361,313
$ 643,161
269,835)
373,326
15,189 )
3,176
$ 361,313
  • 77 -

39. Other disclosures

  • (1) Major transactions:

  • Acquisition of real estate properties amounting to more than NT$100 million or 20% of paid up capital: None.

  • Disposal of real estate properties amounting to more than NT$100 million or 20% of paid up capital: None.

  • Core business transactions conducted with related parties that amount to more than NT$100 million or more than 20% of paid-up capital: None.

  • Related party receivables amounting to more than NT$100 million or 20% of paid-up capital: None.

  • Trading of derivatives: None.

  • Others: None.

  • (2) Information on invested businesses: None.

  • (3) Information relating to investments and business activities in the Mainland: None. (4) Information of dominant shareholders:

5.
Trading of derivatives: None.
6.
Others: None.
Information on invested businesses: None.
Information relating to investments and business activities in the
Information of dominant shareholders:		 5.
Trading of derivatives: None.
6.
Others: None.
Information on invested businesses: None.
Information relating to investments and business activities in the
Information of dominant shareholders:		 Mainland: None.
Unit: shares
Shareholding
Name ofdominantshareholder		 Shares held Shareholding
percentage (%)
Chien Cheng Development Co., Ltd.
OSTA TRADING CO., LTD.
Sheng Ching Investment Co., Ltd.		 18,806,192
15,823,085
15,159,289		 6.24%
5.25%
5.03%

  • Note 1: Information on major shareholders, as presented in this chart, was taken from records of the Taiwan Depository & Clearing Corporation as of the final business day of the reported quarter; and included parties holding book-entry common and preferred shares (including treasury stock) for an aggregate ownership of 5% and above. Share capital reported in the Company’s financial statements may differ from the number of shares delivered via book entry due to different basis of preparation/calculation.

  • Note 2: Shareholders who placed shares under trust are disclosed based on sub-accounts under trustee’s main trust account. Shareholders with more than 10% ownership interest are subject to insider equity reporting, according to the Securities and Exchange Act. Insider equity includes shares held in own name and any shares placed under trust that the insider has control over. Please access the Market Observation Post System for reports on insider equity.

40. Segment information

Non-life insurance was the Company’s primary and only major business segment for periods from January 1 to September 30, 2020 and 2019; therefore, segment-by-segment disclosure of financial information is not required.

  • 78 -

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