saving life assurance dac darta for the financial …...2016/12/31 · for the financial year ended...

Darta Saving Life Assurance dac

Directors’ report andfinancial statements

For the financial year ended31 December 2016

Registered number 365015


Contents Page

Directors and other information 2-3

Directors’ Report 4-7

Statement of Directors’ responsibilities in respect of the Directors’ Reportand financial statements 8

Independent Auditor’s Report 9-10

Statement of Comprehensive Income 11

Statement of Other Comprehensive Income 12

Statement of Financial Position 13-14

Statement of Changes in Equity 15

Statement of Cash Flows 16

Notes to the Financial Statements 17-46

I


Directors and other information

DirectorsMauro Re Chairman, ItalianJames Ruane (Independent Non-Executive)Philip Clarke (Non-Executive)John Finnegan (Executive Director)David Kingston (Independent Non-Executive)John Lyons (Non-Executive)Davide Moia Italian (Non-Executive)Giampaolo Viseri Italian (Non-Executive)Gino Fassina Italian (Non-Executive)

Registered office Allianz HouseElmparkMerrion RoadDublin 4

Secretary Philip Clarke (Resigned 28 February 2017)Allianz HouseElmparkMerrion RoadDublin 4

Francis O’Hara (Appointed 1 March 2017)Allianz HouseElmparkMerrion RoadDublin 4

Head of Actuarial Function Michael CulliganMilliman Limited7 Grand Canal, Grand Canal Street LowerDublin 2

Independent Auditor KPMG1 Harbourmaster PlaceWSCDublin 1

Main Bankers AIB7/12 Dame StreetDublin 2

Allianz Bank Financial Advisors S.p.A.Piazzale Lodi n.320137 Milano, Italy

Allianz SEKonigstrasse 28,80802 Munich,Germany

BNP Paribas Securities ServicesVia Ansperto 5 , 20123 Milano, Italy

2


Directors and other information (continued)

Solicitors Dillon Eustace33 Sir John Rogerson’s QuayDublin 2

Service Provider Irish Progressive Services International LimitedBlock C, Irish Life Centre, Lower Abbey StreetDublin I

Investment Managers Investment Managers (continued)

Addvision Wealth Management SA Rothschild LuganoAgora Investments SGR S.p.A. Rothschild Wealth Management (UK)Allianzbank Schroder Investment Management LtdAllianz Global Investors GmbH SymphoniaAzimut TheoremaBanca Albertini SYZ & C. S.p.A UBI Prarnerica SGR SpaBanca del Ceresio SA ValeurBanca Leonardo Vontobel LuganoBanque Morval SA

Banque Pictet & Cie SA Geneve

B lackRock Investment Management Ltd

BSICarmignac Gestion SACGM Italia Sim SpaCompass Asset Manager SA

Crossinvest SA

Finpartner Financial Services SA LuganoFranklin Templeton Investment Management LimitedGAM SGR S.p.A.Gamma Capital Management Ltd

Intesa San Paolo Private Banking S.p.A.

Invesco Asset Managers

Investitori SGR S.p.A.

JP Morgan Asset Management

Julius Baer Lugano — Switzerland

Kairos AM SAKairos Partners SGR SpaLemanik LuganoM&G Investments

Morgan Stanley Investment ManagementPairstech Capital Management LLPPharusPictet Asset Management Ltd

Pictet & CIE (Europe) S.A. Luxembourg

PIMCO Europe Ltd

Pioneer Investment Management SGR Spa

3


Directors’ Report

The Directors present their report and the audited financial statements for the financial year ended 31December 2016.

Principal activity, review of key performance indicators and future developments

The Company is authorised in Ireland to transact life assurance business in the European Union (“EU”) underthe Solvency II Directive (2009/138/EC) as introduced into domestic Irish Legislation by the EU (Insuranceand Reinsurance) Regulations 2015, effective 1 January 2016.

The Company’s main business is the sale of single premium policies in Italy, under which the risk related tothe underlying investments is carried by the policyholders.

The Company had significant sales for 2016 of €2,585m, 22% below the record previous year (2015:€3,309m). The largest contributing products of total sales were Challenge and Challenge Plus 70% (2015:75%), Blazar 18% (2015: 1%), Private Insurance contracts 5% (2015: 11%), Progetto Reddito 4% (2015: 7%)and Personal Target 2% (2015: 6%). These sales relate to investment contracts and are not included in “Netpremiums written and earned” in the Statement of Comprehensive Income, in accordance with 1AS39 (seeNote 16 “Financial liabilities’). The amount of net insurance premiums reported in the Statement ofComprehensive Income is 2m (2015: €0.6m) due to the unbundling of contracts in line with the Company’saccounting policy under WRS 4 (see Note 3).

During the year gross fee income of €219m was earned, 12% below the record previous year (2015: €248m).Total policyholder funds stood at €13,471m (2015: €11,952m) at the financial year end, driven by net inflowsof €1,338m (2015: €2,195m) and net income, expenses and capital gains of €181m (2015: losses €53m).

Claims incurred during the year amounted to €1,247m (2015: €1,1 14m). The increase in claims in 2016 wasexpected as the book of business increases and matures and this trend is expected to continue into the future.

It is the Company’s objective to achieve a satisfactory level of profitability for its shareholder, whilst takinginto account statutory, financial and regulatory requirements and the reasonable expectations of itspolicyholders. In these circumstances, the Directors are satisfied with the Company’s performance during2016 and consider that it is well placed to continue its development.

The Company launched a new version of the Challenge product called “Challenge Plus” in December 2014and commenced sales in 2015. As at 31 December 2016 total premiums for this product are €l,461m (2015:€1,507m). This is similar to the original Challenge product but with an enhanced death benefit. Instead ofpaying an additional death benefit of 1% of the fund value to lives assured under 66 years old, the deathbenefit offered is 10% of the net investment (difference between the premiums paid and any partial surrenderspaid until the notification of death) capped at €50k. 90% of any additional mortality risk underwritten by theCompany under this new product is reinsured to the Reinsurance Group of America (“RGA”). This additionaldeath rider benefit is unbundled and treated as insurance under WRS 4, with the investment element accountedfor as investment under 1AS39.

During 2016, the Company introduced the new Challenge Plus Transformation Product whereby policyholderscurrently in Challenge, that would like to avail of the features of Challenge Plus above, can transform on avoluntary basis.

In line with the Company strategy to diversify its distribution channel and product range, during the year theCompany carried out some new developments, including the sale of versions of its unit linked products byvarious new non-Group distributors in Italy and Lithuania. These new developments are expected to growover the coming years.

4


Directors’ Report (continued)

Result for the financial year and the state of affairs at the financial year end

The result for the Company for 2016 is set out in the Statement of Comprehensive Income on page 11, andthis shows a net profit from total operations of €44.lm, after taxation, compared with a record net profit of€72.9m for 2015, driven primarily by strong market performance in the first six months of 2015.

The Company’s Statement of financial Position is set out on pages 13 and 14, and this shows thatshareholders’ equity at the financial year end was €256.3m, compared with €232.lm at the end of 2015.

Note 15 to the financial statements on page 41 confirms that the Company had a satisfactory surpitis overregulatory Solvency II capital requirements at year end.

Dividends

In 2016, the Directors approved and paid a dividend of €4.00 per share amounting to €20,000,000 in total, inrespect of the financial year ended 31 December 2016.

Risk management objectives and policies

Ultimate responsibility for the Company’s internal controls, including risk management, rests with theDirectors of the Company. Management are responsible for monitoring, measuring, controlling and reportingon the risks connected with the Company’s activities on a day to day basis.

The Directors acknowledge the importance of effective corporate governance and risk management processes,to ensure the Company’s continuing compliance with all applicable laws and regulations and to safeguard theCompany’s value and reputation. These processes are kept under review so improvements can be made thattake account of best practice, increasing regulatory requirements and the requirements of its parent group.

The Company is subject to and complies with the Corporate Governance Requirements for InsuranceUndertakings 2015 (the “Requirements”) as issued by the Central Bank of Ireland. The Directors note theCompany is not subject to the requirements of Appendix I to the Requirements applying to High Impactdesignated insurance undertakings.

The Board is assisted in its governance by the operation of a number of committees, two of which, the AuditCommittee and the Risk Committee, have roles in the development and monitoring of the Company’s internalcontrol and risk management systems. Both committees are chaired by independent non-executive Directors.

Information on the main financial risks and uncertainties that the Company faces and how these are managedis outlined in Note 2 to the financial statements.

Composition of Group

The Company is a wholly owned subsidiary of Allianz S.p.A., a company incorporated in Italy. TheCompany’s ultimate parent company is Allianz SE, a company incorporated in Germany.

Directors

The names of persons who were Directors at any time during the financial year 2016 are set out on page 2.

5



Directors and secretary and their interests

The Directors and secretary who held office at 31 December 2016 had no interests in the shares or indebentures or loan stock of the Company or of group companies throughout the year.

Accounting records

The Directors believe that they have complied with the requirements of Section 281 of the Companies Act2014 with regard to adequate accounting records by employing a service provider and personnel withappropriate expertise and by providing adequate resources to the financial function. The accounting records ofthe Company are maintained at the premises of its service provider, Irish Progressive Services InternationalLimited, at Block C, Irish Life Centre, Lower Abbey Street, Dublin 1.

Events since the financial year end

On 28 February 2017, Philip Clarke resigned as Company Secretary and Francis O’Hara was appointed asCompany Secretary on 1 March 2017. There have been no material events since the reporting date requiringamendment to the financial statements.

Independent Auditor

In accordance with Section 383, (2) of the Companies Act 2014 the auditor, KPMG, Chartered Accountants,have indicated their willingness to continue in office.

Statement of relevant audit information

The Directors listed on page 2 have confirmed that:• So far as they are aware, there is no relevant audit information of which the Company’s statutory

auditors are unaware; and• Each Director has taken all of the steps they ought to have taken as Director in order to be aware of

any relevant audit information and to establish that the Company’s statutory auditors are aware of thatinformation.

Directors’ Compliance Statement

The Directors acknowledge that they are responsible for securing the Company’s compliance with its relevantobligations and confirm that:

• Company’s corporate governance framework, documented in Company’s internal policies, sets out therequirements to ensure compliance with relevant obligations;

• Appropriate arrangements and structures have been put in place that are, in the Directors’ opiniondesigned to secure material compliance with the Company’s relevant obligations;

• A review has been completed during the financial year to which the report relates, of anyarrangements or structures that have been put in place.

Company name change

In accordance with the Companies Act 2014, as an Insurance Company, the Company was required to convertits company registration status from ‘Limited company’ to ‘designated activity company’ (“dac”). With effectfrom the 28th June 2016 the name of the Company has changed from Darta Saving Life Assurance Limited toDarta Saving Life Assurance dac.

6



Appreciation

The Directors wish to thank everyone who has contributed to the Company’s continuing development, inparticular our policyholders, our employees, our distributors, our service providers and our advisors.

The financial statements were approved by the Board of Directors on 23 March 2017, and signed on its behalfby:

ames RuaneDirectorDirector

Date: 23 March 2017

7


Statement of Directors’ responsibilities in respect of the Directors’ Report andfinancial statements

The Directors are responsible for preparing the Directors’ Report and financial statements in accordance withapplicable law and regulations.

Cotnpany Law requires the Directors to prepare financial statements for each financial year. Under that law,the Directors have elected to prepare the financial statements in accordance with International FinancialReporting Standards (IFRS) adopted by the EU.

Under company law, the Directors must not approve the financial statements unless they are satisfied that theygive a true and fair view of the assets, liabilities and Financial Position of the Company and of its profit or lossfor that financial year. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether they have been prepared in accordance with IFRS as adopted by the EU; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Company will continue in business.

The Directors are responsible for keeping adequate accounting records which disclose with reasonableaccuracy at any time the assets, liabilities, financial Position and profit or loss of the Company and enablethem to ensure that the financial statements comply with the Companies Act 2014. They have generalresponsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company andto prevent and detect fraud and other irregularities. The Directors are also responsible for preparing aDirectors’ Report that complies with the requirements of the Companies Act 2014.

tames RuaneDirector

On behalf of the board

Date: 23 March 2017

8

KPMGAudit1 Harbourmaster PlaceIFSGDublin 1DOl F6F5Ireland

Independent Auditor’s Report to the members of Darta Saving Life Assurance dac

We have audited the financial statements (“financial statements”) of Darta Saving Life Assurance dacfor the year ended 31 December 2016 which comprises of the Statement of Comprehensive Income,Statement of Other Comprehensive Income, Statement of Financial Position, Statement of Changesin Equity, Statement of Cash Flows and the related notes. The financial reporting framework that hasbeen applied in their preparation is Irish law and International Financial Reporting Standards (IFRS)as adopted by the European Union. Our audit was conducted in accordance with InternationalStandards on Auditing (ISAs) (UK & Ireland).

Opinions and conclusions arising from our audit

7 Our opinion on the financial statements is unmodified

In our opinion the financial statements:

• give a true and fair view of the assets, liabilities and financial position of the Company as at31 December 2016 and of its profit for the year then ended;

• have been properly prepared in accordance with IFRS as adopted by the European Union;and

• have been properly prepared in accordance with the requirements of the Companies Act2014.

2 Our conclusions on other matters on which we are required to report by the Companies Act2074 are set out below

We have obtained all the information and explanations which we consider necessary for the purposesof our audit.

In our opinion the accounting records of the Company were sufficient to permit the financialstatements to be readily and properly audited and the financial statements are in agreement with theaccounting records.

In our opinion the information given in the Directors’ Report is consistent with the financial statements.

3 We have nothing to report in respect of matters on which we are required to report byexception

ISAs (UK & Ireland) require that we report to you if, based on the knowledge we acquired during ouraudit, we have identified information in the annual report that contains a material inconsistency witheither that knowledge or the financial statements, a material misstatement of tact, or that is otherwisemisleading.

In addition, the Companies Act 2014 requires us to report to you if, in our opinion, the disclosures ofdirectors’ remuneration and transactions required by sections 305 to 312 of the Act are not made.

9

KPMG, an Irish partnership and a member firm of the KPMG networkof independent member firms aft hated with KPMG internttionaiCooperative I KPMG Internationai’i, a Swiss entity

Independent Auditor’s Report to the members of Darta Saving Life Assurance dac(continued)

Basis of our report, responsibilities and restrictions on use

As explained more fully in the Statement of Directors’ Responsibilities set out on page 8, the Directorsare responsible for the preparation of the financial statements and for being satisfied that they give atrue and fair view and otherwise comply with the Companies Act 2014. Our responsibility is to auditand express an opinion on the financial statements in accordance with Irish law and ISAs (UK andIreland). Those standards require us to comply with the Financial Reporting Council’s EthicalStandards for Auditors.

An audit undertaken in accordance with ISAs (UK & Ireland) involves obtaining evidence about theamounts and disclosures in the financial statements sufficient to give reasonable assurance that thefinancial statements are free from material misstatement, whether caused by fraud or error. Thisincludes an assessment of: whether the accounting policies are appropriate to the Company’scircumstances and have been consistently applied and adequately disclosed; the reasonableness ofsignificant accounting estimates made by the directors; and the overall presentation of the financialstatements.

In addition, we read all the financial and non-financial information in the Annual Report to identifymaterial inconsistencies with the audited financial statements and to identify any information that isapparently materially incorrect based on, or materially inconsistent with, the knowledge acquired byus in the course of performing the audit. If we become aware of any apparent material misstatementsor inconsistencies we consider the implications for our report.

Whilst an audit conducted in accordance with ISAs (UK & Ireland) is designed to provide reasonableassurance of identifying material misstatements or omissions it is not guaranteed to do so. Rather theauditor plans the audit to determine the extent of testing needed to reduce to an appropriately lowlevel the probability that the aggregate of uncorrected and undetected misstatements does notexceed materiality for the financial statements as a whole. This testing requires us to conductsignificant audit work on a broad range of assets, liabilities, income and expense as well as devotingsignificant time of the most experienced members of the audit team, in particular the engagementpartner responsible for the audit, to subjective areas of the accounting and reporting.

Our report is made solely to the Company’s members, as a body, in accordance with section 391 ofthe Companies Act 2014. Our audit work has been undertaken so that we might state to theCompany’s members those matters we are required to state to them in an auditor’s report and for noother purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone other than the Company and the Company’s members as a body, for our audit work, for thisreport, or for the opinions we have formed.

Hubert Crehan Date: 23 March 2017Partnerfor and on behalf ofKPMGChartered Accountants, Statutory Audit Firm1 Harbourmaster PlaceIFSCDublin 7

10


Statement of Comprehensive Incomefor the financial j’ear ended 31 December 2016

2016 2015Note €‘OOO €‘OOO

Gross premiums written 2,585 $08Outward reinsurance premiums (568) (190)Net premiums written and earned 3 2,017 61$

Investment return 4 394,206 215,257

Fees and other income/(expense) 5 231,746 259,055

Total income 627,969 474,930

Change in investment contract liabilities 16 (389,299) (209,193)Change in technical provisions for insurance contracts 17 (32)

Total change in technical provisions (389,331) (209,193)

Insurance claims and benefits incurred (70) -

Ceded insurance claims and benefits incurred 63

Claims paid net of reinsurance (7)

Acquisition and administration expenses 6 (188,194) (182,459)

Profit before taxation 50,437 83,278

Taxation 7 (6,306) (10,410)

Profit for the financial year attributable to equity holders 44,131 72,868

The accounting policies and the notes on pages 17 to 46 form an integral part of these financial statements.

II


Statement of Other Comprehensive Incomefor the financialyear ended 31 December 2016

2016 2015

f’OOO €‘OOOItems that may be recltissWed subsequently to the Statement ofcomprehensive IncomeMovements in financial assets available for sale:

- fair value movement 129 (1,393)- deferred tax effect of fair value movement (16) 174

Net gains/(losses) recognised in equity 113 (1,219)

Profit for the financial year 44,131 72,868

Total comprehensive income 44,244 71,649


12


Statement of Financial Positionas at 31 December 2016


2016 2015Note €‘OOO €‘OOO

Assets

Cash and cash equivalents 78,699 87,225

Other receivables 11 23,470 20,851

Deferred tax asset 7 149 165

Shareholder financial assets

Investments available for sale 10 60,655 79,084

Advance payment of Italian Policyholders’ Tax 8 214,831 169,788

Deferred acquisition costs 9 58,632 44,035

Policyholder financial assets

Investments at fair value through profit or loss 10 13,470,827 1 1,951,635

Total assets 13,907,263 12,352,783

13


Statement of Financial Position (continued)as at 31 December 2016

2016 2015Note E’OOO €‘OOO

Shareholder’s equity

Called up share capital 13 5,000 5,000Capital contributions 14 51,000 51,000Available for sale reserve (1,046) (1,159)Profit and loss reserve 201,407 1 77,276

Total Shareholder’s equity interests 256,361 232,117

Liabilities

Financial liabilities - investment contracts 16 13,470,827 11,951,635

Technical provisions for insurance contracts 17 32 -

Deferred income 18 32,218 35,211

Creditors and other payables 19 147,397 133,711

Corporation tax payable 42$ 109

Total liabilities 13,650,902 12,120,666

Total liabilities and shareholder’s equity 13,907,263 12,352,783


On behalf of the board

Joh gan James RuaneDirector Director

Date: 23 March 2017

14


Statement of Changes in Equityas at 31 Decenther 2016

ProfitShare Capita] AFS and loss Total

Capital Contributions reserve reserve€‘OOO ‘O00 ‘000 f’OOO €‘OOO

Balance at 1 January 2016 5,000 51,000 (1,159) 177,276 232,117

Profit for the financial year - - 44,131 44,131Items that ma be reclasstfied subsequentlyto the Statement of C’omprehensive IncomeMovement in investments available for sale (“AFS”)- fair value movement - 129 129- deferred tax effect of fairvalue movement - (16) - (16)

Total recognised gains for the financialyear - 113 44,131 44,244

Dividends paid (Note 14) - - (20,000) (20,000)

Balance at 31 December 2016 5,000 51,000 (1,046) 201,407 256,361

Balance at 1 January 2015 5,000 51,000 60 104,408 160,468

Profit for the financial year - - - 72,868 72,868Items that ma be reclassified subsequentlyto tit e Statement of Comprehensive IncomeMovement in investments available for sale- fair value movement - - (1,393) - (1,393)- deferred tax effect of fairvalue movement - - 174 - 174

Total recognised (losses)/gains for thefinancialyear - - (1,219) 72,868 71,649

Dividends paid (Note 14) - - - - -

Balance at 31 December 2015 5,000 51,000 (1,159) 177,276 232,117


15


Statement of Cash Flowsfor thefinancialyear ended 31 December 2016

2016 2015

€‘OOO €‘OOO

Profit before taxation 50,437 $3,278Net change in fair value of investments (392,351) (212,763)Net change in investment contract liabilities 389,299 209,193fund expenses borne by policyholder 3,052 3,570Net change in deferred acquisition cost (14,597) (1,672)Net change in provision for deferred income (2,993) 4,073Interest income and expense 184 112

33,031 85,791

(Increase) in trade and other receivables (47,646) (35,595)Increase/(decrease) in trade and other payables 14,036 (19,131)

(33,610) (54,726)

Interest paid and received (184) (112)Corporation tax paid and received (5,984) (10,819)

(6,168) (10,931)

Net cash flows from operating activities (6,747) 20,134

Net cash flows from investments available for sale 18,221 2,576

Net cash flows from investing activities 18,221 2,576

Dividends paid (20,000) -

Net cash flows from financing activities (20,000)

Net cash flows from total operations (8,526) 22,710

Cash and cash equivalents at 1 January 87,225 64,515

Cash and cash equivalents at 31 December 78,699 87,225

16


Notes to the Financial Statements

1. Accounting Policies

Darta Saving Life Assurance dac is a company domiciled in the Republic of Ireland and the principalaccounting policies adopted by the Company are set out in this note.

Statement of complianceAs peru-lifted under Irish company law, the Company has chosen to prepare the financial statements inaccordance with IFRS as adopted by the EU.

The IFRS adopted by the EU and applied by the Company are those that were effective at 31 December 2016.These have been consistently applied for the preparation of these financial statements.

Basis of preparationThe financial statements have been prepared in accordance with the Companies Act 2014, and on thehistorical cost basis except that the financial assets and liabilities are classified as at fair value through profitor loss.

The financial statements are expressed in Euro (€), which is the functional and presentation currency of theCompany.

The preparation of financial statements in conformity with IFRS requires management to make judgements.estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities,income and expenses. The estimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under the circumstances, the results of which form thebasis of making the judgements about carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.

The Company applies the accruals concept for the recognition of expenses in the Statement of ComprehensiveIncome in order to reflect the effect of the transactions as they occur and not as cash or its equivalent is paid.

Adoption of new and revised StandardsA number of new standards, amendments to standards and interpretations are effective for annual periodsbeginning after 1 January 2016, and have not been applied in preparing these financial statements. Those thatmay be relevant to the Company are set out below. The Company does not plan to adopt these standards early.

IFRS 9: Financial instruments (effective periods beginning on or after 1 January 2018)

IFRS 7: Amendment: financial Instruments: Disclosures — Amendments requiring disclosures about the initialapplication of IFRS 9 (effective periods beginning on or after 1 January 201 8)

IFRS 15: Revenue from contracts with customers (effective periods beginning on or after 1 January 2018)

None of these are expected to have a significant effect on the financial statements of the Company, except forIFRS 9 financial Instruments.

17


Notes to the Financial Statements (continued)

1. Accounting Policies (continued)

Adoption of new and revised Standards (contintted)IFRS 9, published in July 2014, will replace existing guidance in lAS 39. It includes revised guidance on theclassification and measurement of financial instruments, whereby the standard now contains two primarymeasurement categories for financial assets: amortised cost and fair value. IfRS 9 also includes a newexpected credit loss model for calculating impairment on financial assets, and the new general hedgeaccounting requirements. It also carries forward the guidance on recognition and derecognition of financialinstruments from lAS 39.

IFRS 9 is effective for aimual reporting periods beginning on or after 1 January 201$, with early adoptionpermitted. The Company does not currently plan to early adopt the new standard and is assessing the impact ofthe new standard on the Company, and currently plans to apply IFRS 9 initially on 1 January 2018.

Product classification — investment and insurance contractsContracts under which the Company accepts significant insurance risk from another party by agreeing tocompensate the policyholder if a specified uncertain future event adversely affects the policyholder areclassified as insurance contracts.

Insurance risk is significant if, and only if, an insured event could cause an insurer to pay significantadditional benefits in any scenario. An insurer shall assess the significance of insurance risk contract bycontract. Contracts that qualify as insurance contracts remain an insurance contract until all risks andobligations are extinguished or expired.

Where the risk is primarily borne by the policyholder, the contract is deemed to be an investment contract.

Where a direct contract contains both an investment and an insurance element (rider benefit) the Company“unbundles” this contract into its constituent parts. The insurance element of the contract is accounted for asan insurance contract under IFRS 4 and the investment element of the contract is accounted for as aninvestment contract under 1AS39.

A contract that qualifies as an insurance contract remains an insurance contract until all rights and obligationsare extinguished or expire. However, an investment contract classified as such on inception, couldsubsequently be reclassified as an insurance contract, if it meets the insurance definition as described above.

Revenue - premiums earned in respect of insurance contracts (unbundling) are accounted for in the Statementof Comprehensive Income in the same period in which they are earned. Reinsurance premiums are accountedfor in accordance with the terms of the reinsurance contracts and the original contracts for which thereinsurance was concluded. Premiums ceded for reinsurance are deducted from premiums earned.

Claims — claims incurred and paid in respect of insurance contracts are unbundled under IFRS 4 and areaccounted for in the Statement of Comprehensive Income as Insurance claims and benefits incurred in thesame period in which they are incurred. Reinsured claims are deducted from the Insurance claims and benefitsincurred.

Investment contracts - recognition and measurementInvestment contract contributions received from policyholders are not recognised in the Statement ofComprehensive Income as premiums but are accounted for as deposits in the Statement of financial Position.Financiat liabilities in respect of such contracts are presented in the Statement of Financial Position as“financial liabilities - investment contracts”.

All investment contracts issued by the Company are designated on initial recognition as at fair value throughprofit or loss. The basis of this designation is that the financial assets and liabilities are managed and evaluatedon a fair value basis.

1$




Investment contracts - recognition and measurement (continued)The designation also eliminates or significantly reduces a measurement inconsistency that would otherwisearise if these financial liabilities were not measured at fair value since the assets held to back the investmentcontract liabilities are also measured at fair value.

The fair value of the Company’s unit-linked investment contract liabilities is based on the fair value of thefinancial assets held within the appropriate unit-linked funds.

Changes in the fair value of investment contracts are included in the Statement of Comprehensive Income inthe period in which they arise.

Investment contract receivables and pavabtes - Amounts due to and from policyholders, agents and others inrespect of investment contracts are included in other receivables and creditors and other payables.

Deferred acgttisition costs - Acquisition costs on investment contracts include sales commissions.Also included within acquisition costs are the value of additional units credited to policyholder accountbalances upon initial investment in relation to certain products. These sales indticement costs are recoverablethrough penalties payable on stirrender, which are calculated such that penalties receivable will be at leastequal to unamortised Deferred Acquisition Cost at any point.

Acquisition costs are deferred as an explicit deferred acquisition cost asset, gross of tax, to the extent that theyare recoverable out of fttture revenue margins to which they relate. Such costs are amortised through theStatement of Comprehensive Income over the period in which the future revenue margins on the relatedcontracts are expected to be earned. The rate of amortisation is based on a prudent assessment of the expectedpattern of receipt of ftiture revenue margins, taking account of persistency, from the related contracts. Allother costs are recognised as expenses when incurred.

Investment management services - Investment contracts issued by the Company involve the provision ofinvestment management services. fees charged for such services are recognised as revenue based upon thestage of completion of the contracts and are included under “fees and other income” in the Statement ofComprehensive Income. Recurring fees are recognised as earned on an accrtials basis. Front-end fees receivedat the inception of a contract are deferred and amortised over the anticipated period for which the services willbe provided, over the expected term of the contract.

Claims and surrenders - F or investment contracts, benefits paid are not included in the Statement ofComprehensive Income but instead are deducted from investment contract liabilities in the Statement ofFinancial Position. The additional payment paid to policyholders in the event of a death claim is deductedfrom ‘fees and other income’ in the Statement of Comprehensive Income. For Insurance contracts, claimsincurred and benefits paid including the ceded portion are disclosed separately in the Statement ofComprehensive Income.

Investment returnIncome from financial assets comprises interest and dividend income, net gains on financial assets classifiedas fair value through profit or loss, and realised gains/losses on financial assets classified as available for sale.

Net changes in the fair value of financial assets at fair value through profit or loss are included in theStatement of Comprehensive Income in the period in which they arise, as well as dividend and interest incomeearned from these assets. Net changes in the fair value of available for sale financial assets are included in theStatement of Other Comprehensive Income in the period in which they arise.

19




Investment return ontinued)

Dividend income is recorded on the ex-dividend date. Bond income is recorded on the accrual basis anddeposit interest is recorded on a receipts basis, calculated using an effective interest methodology.

Realised gains and tosses are calculated as the difference between the net sale proceeds and original cost.

Unrealised gains and losses are calculated as the difference between the fair value of financial assets at the endof the accounting period and the fair value at the beginning of the period or the purchase price for assetsacquired during the period.

Financial assetsFinancial assets held to back investment contract liabilities are designated upon initial recognition as at fairvalue through profit or loss and are measured at fair value. The basis of this designation is that the financialassets and liabilities are managed and evaluated together on a fair value basis. This designation also eliminatesor significantly reduces a measurement inconsistency that would otherwise occur if these financial assets werenot measured at fair value and the changes in fair value were not recognised in the Statement ofComprehensive Income.

Financial assets that are investments which are not held to back investment contract liabilities are eitherdesignated as available for sale and unrealised gains/losses are recognised separately within the Statement ofOther Comprehensive Income or are categorised at fair value through profit or loss.

Financial assets are initially measured at fair value, plus, in the case of assets not designated at fair valuethrough profit or loss, transaction costs that are directly attributable to their acquisition. Transaction costs inrelation to financial assets designated at fair value through profit or loss are expensed immediately. Afterinitial recognition, the Company measures financial assets at fair value through profit or toss and available forsale financial assets at fair value without any deduction for transaction costs it may incur on disposal. The fairvalues of investments are based on quoted bid prices where available or amounts derived from cash flowmodels. Fair values for unlisted equity securities are estimated using applicable price/earnings or price/cashflow ratios refined to reflect the specific circumstances of the issuer. Cash and cash equivalents, loans andreceivables are measured at amortised cost.

OffsettingFinancial assets and financial liabilities are offset and the net amount presented in the Statement of FinancialPosition when, and only when, the Company has a legal right to offset the amounts and it intends either tosettle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis for gains and losses from financial instruments at fair valuethrough profit or loss and foreign exchange gains and losses. There were no offset trading positions in 2016(2015: €nil).

ImpairmentThe carrying amounts of the Company’s assets, which are not at fair value throtigh profit or loss, are reviewedat each Statement of Financial Position date to determine whether there is any indication of impairment. If anysuch indication exists, the carrying value is reduced to the estimated recoverable amount by means of a chargeto the Statement of Comprehensive Income. The amount of the cumulative loss that is recognised in profit orloss is the difference between the acquisition cost and the recoverable amount, less any impairment loss onthat financial asset previously recognised in the Statement of Comprehensive Income.

20


Notes to the Financial Statements (continued]

1. Accounting Policies (‘continued)

Impairment (‘continued)

Calculation of recoverable amountThe recoverable amount of receivables carried at amortised cost is calculated as the present value of estimatedfuture cash flows, discounted at the original effective interest rate. Receivables with short term duration arenot discounted.

The recoverable amount of available for sale securities and other marketable investments is current fair value.The recoverable amount of other assets is the greater of their net selling price and value in use. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to the asset. For anasset that does not generate largely independent cash inflows, the recoverable amount is determined for thecash generating unit to which the asset belongs.

The advance payment of the Italian Policyholders’ Tax asset is held at face value without the application ofdiscounting and the recoverability thereof is reviewed at each year end.

Reversals ofhnpairinentIn respect of other assets, an impairment loss is reversed if there has been a change in the estimates used todetermine the recoverable amount.

An impairment loss is reversed only to the extent that an asset’s carrying amount does not exceed the carryingamount that would have been determined, net of depreciation or amortisation, if no impairment loss had beenrecognised.

Cash and cash equivalentsCash and cash equivalents comprise cash and bank balances and deposits with a maturity of less than 90 days.These assets are measured at amortised cost. Net bank overdrafts are included as a component of cash andcash equivalents.

Recognition of financial assets and liabilitiesFinancial assets and financial liabilities at fair value through profit or loss are initially recognised on the tradedate, which is the date on which the Company becomes a party to the contractual provisions of the instrument.Other financial assets and financial liabilities are recognised on the date on which they are originated.

De-recognition of financial assets and liabilitiesThe Company derecognises a financial asset when the contractual rights to the cash flows from the assetexpire or when it transfers the financial asset and the asset qualifies for de-recognition in accordance with lAS39.

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled orexpires.

TaxationTaxation comprises current and deferred taxation and is recognised in the Statement of ComprehensiveIncome except to the extent that it relates to items recognised directly in equity, in which case it is recognisedin equity.

Current tax, including Irish corporation tax and foreign tax, is provided on the Company’s taxable profits, atamounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantiallyenacted by the Statement of Financial Position date.

21



1. Accounting Policies (col?tinued)

Taxation (continued)Except where otherwise required by accounting standards, full provision without discounting is made for alltemporary differences which have arisen but not reversed at the Statement of Financial Position date. Deferredtax balances are provided at rates of taxation expected to prevail at the time of reversal.

A deferred tax asset is recognised where it is probable that taxable profit will be available against which thedeductible temporary difference can be titilised.

Deferred incomeThe income that is deferred is in respect of investment contracts on which a front-end fee applied in relation toservices to be provided in future periods. The deferred income reserve is amortised over the anticipated life ofthe contracts.

Advance Payment of Italian Policyholders’ TaxPayments to the Italian authorities as a result of the Company being a withholding tax agent are recognised asassets. Those assets are presented within the Statement of Financial Position in their nominal amounts (nodiscounting is applied). The payments are recoverable from deductions made from capital gains made bypolicyholders, by offset against taxes payable to Italian revenue within a period of five years or, after fiveyears they may be transferred to a company in the same group. The exit tax liability (“ETL”) at year end isnetted firstly against the previous sixth year recoverable asset. Any excess ETL is netted against the remainingrecoverable asset, whereas any excess sixth year recoverable asset is netted against the year end liability. Therecoverable amount of the asset is reviewed at each year end.

foreign currenciesThe reporting and functional currency of the Company is the Euro. Monetary assets and liabilitiesdenominated in foreign currencies are translated into Euro at the exchange rates rciling at the Statement ofFinancial Position date and revenues, costs and non monetary assets at the exchange rates ruling at the dates ofthe transactions. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rate at the date of the transaction. Non-monetary assets andliabilities denominated in foreign currencies that are stated at fair value are translated to Euros at foreignexchange rates ruling at the dates the fair value is determined. Profits and losses arising from foreign currencytranslations and on settlement of amounts receivable and payable in foreign currency are included in theStatement of Comprehensive Income.

PensionsPension costs for the Company’s defined contribution pension arrangements are included in administrationexpenses in the Statement of Comprehensive Income as incurred. The assets represented by the Company’scontributions, and those of employees, if any, are vested in independent trustees for the benefit of employeesand their dependents.

ProvisionA provision is recognised in the Statement of Financial Position when the Company has a present legal orconstructive obligation as a result of past events, under which it is more likely than not that an outflow ofeconomic resources will be required to settle the obligation and the amount of the provision can be reliablyestimated.

Accounting estimates and judgmentsThe Company’s critical accounting policies and estimates and the application of these policies and estimatesare considered by management for each reporting period.

22




Deferred acquisition costsIn determining the amount of front-end fees and acquisition costs to defer in relation to the Company’scontracts, judgments must be made in relation to the lives of the contracts and therefore the time period overwhich these balances are amortised to the Statement of Comprehensive Income. For fixed-term structuredproducts, the Company amortises the amounts over the period of the policy. For open ended unit-linkedproducts, the expected life of the policy is subject to a high degree ofjudgement and can change significantlyover time with changes in investor sentiment and market or product development. In making an appropriateestimate for each reporting period, account is taken of actual past experience and future expectations and ofpractice, where appropriate, within the Allianz Group.

Product classificationA key judgement relates to the classification of the insurance policies written by the Company as investmentcontracts. Contracts with an insurance risk of 10% or greater are classified as insurance contracts by theCompany. Contracts under which the transfer of insurance risk to the Company from the policyholder is notsignificant are classified as investment contracts. In cases where an investment contract contains both aninsurance and deposit component, the Company unbundles these components if the insurance component canbe measured reliably.

Italian tax assetThe asset arising from the advance payment of Italian policyholder tax obligations is expected to berecoverable either by deduction from tax withheld on behalf of policyholders, by offset against taxes payableto Italian revenue within a period of five years or by surrender to group companies after five years. A keyjudgement exercised by Directors is that it is appropriate to carry this asset at its full future recoverable valuewithout reducing it for the time value of money by discounting.

Deftrred incomeDeferred income typically refers to where a policyholder has paid commission on the commencement of apolicy, but which is not recognised immediately in the Statement of Comprehensive Income. Such income isamortised over the expected life of the policy, which is based on historical experience, and any unamortisedamount is recognised when the policy is surrendered.

Valuation of financial instrumentsThe Company classifies fair values using the following fair value hierarchy that reflects the significance of theinputs used in making the fair value measurements.

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e.derived from prices).This category includes instruments valued using: quoted market prices in active markets for similarinstruments; quoted prices for identical or similar instruments in markets that are considered less than active;or other valuation techniques where all significant inputs are directly or indirectly observable from marketdata.Level 3: Valuation techniques using significant unobservable inputs.This category includes all instruments where the valuation technique includes inputs not based on observabledata and the unobservable inputs have a significant effect on the instrument’s valuation. This category includesinstruments that are valued based on quoted prices for similar instruments where significant unobservableadjustments or assumptions are required to reflect differences between the instruments.

In general, financial assets and liabilities are transferred from level 1 to level 2 when liquidity, trade frequencyand activity are no longer indicative of an active market. Conversely, the same policy applies for transfersfrom level 2 to level 1.

23


Notes to the Financial Statements (contint’ed)


Valuation of financial instruments (continued)F air values of financial assets and financial liabilities that are traded in active markets are based on quotedmarket prices or dealer price quotations. for all other financial instruments the Company determines fairvalues using valuation techniques.

Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, creditspreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchangerates, equity and equity index prices and expected price volatilities and correlations. The objective of valuationtechniques is to arrive at a fair value determination that reflects the price of the financial instrument at thereporting date that would have been determined by market participants acting at arms length.

Observable prices and model inputs are usually available in the market for listed Equity and Fixed incomesecurities, Collective Investment Schemes and exchange traded derivatives. Availability of observable marketprices and model inputs reduces the need for management judgement and estimation and also reduces theuncertainty associated with determination of fair values. Availability of observable market prices and inputsvaries depending on the products and markets and is prone to changes based on specific events and generalconditions in the financial markets. These investments are therefore classified as Level I investments.

The Portfolio Bonds which are classified in the Collective Investment Schemes category are priced from firstprinciples when individual holdings are known. Where the Portfolio Bonds are managed under a discretionaryasset management agreement the valuations are provided directly by the investment managers.

Technical provisions for insurance contractsThe Company’s Progetto Reddito and Periodical Solution products allow policyholders to add an optionaladditional death benefit to their policies. This amount is €50k per policy (maximum of€lOOk per life assured).Where the life assured is under 66 years old, the Company’s Challenge Plus product automatically provides anadditional death benefit (10% of premiums paid less partial withdrawals taken, capped at €50k). Premiumcharges taken in relation to these additional death benefits are unbundled from total premiums collected andpresented in the Statement of Comprehensive Income as Insurance premium income under IFRS 4. Anyinsurance claims paid in relation to these additional death benefits during the year are also unbundled and arepresented separately in the Statement of Comprehensive Income as Insurance claims and benefits incurredtinder IF RS 4. Calculations were performed at 31 December 2016 to assess the level of additional technicalprovisions which might be required for these products. Having carried out those calculations, which involvedthe projection of expected future income and outgo on the products in question, technical provisions forinsurance contracts of €32k (2015: €Nil) in the Statement of Financial Position in respect of the additionaldeath benefits on these contracts have been accounted for.

2. Financial risks and risk management

The Company is exposed to a range of risks through its financial assets and its financial liabilities and also inrelation to the accounting estimates and judgements it needs to make in the preparation of its financialstatements and its regulatory returns.

These risks are described below together with the risk management approaches adopted by the Company.

Ultimate responsibility for the Company’s risk management rests with the Directors and the Board issupported by the operation of a number of committees that meet on a regular basis to review and monitor theCompany’s risk exposures. A number of policy statements have been prepared and approved by the Directorswhich set out parameters and limitations to manage and limit financial risks. The Company has notsubstantially changed the approaches adopted to manage its financial risks from the previous accountingperiod.

24



2. Financial risks and risk management (continued)

Risks associated with investment and insurance contractsThe Company matches all the liabilities under investment contracts with assets in the funds for which the unitprices for the contracts are based, and the Company aims to ensure that the investment policy adopted forthese funds is consistent with that communicated to policyholders in their contract documentation. The marketand credit risk relating to policyholder financial assets is borne by policyholders as any change in the value oftheir assets results in an equivalent change in the amount of the Company’s obligation to them. However, theCompany does have exposure to persistency and an indirect exposure to market risk in respect of thecontracts.

Traditionally the Company’s unit-linked products have offered a minimal additional death benefit of up to 1%of the fund value. The Progetto Reddito and the Periodic Solution product offerings include the option ofadditional death benefits with an extra charge levied to pay for the additional benefit.

The Challenge Plus product launched in 2014, and commenced sales in 2015, offers policyholders anadditional death benefit of 10% of the net investment (difference between the premiums paid and any partialsurrenders paid until the notification of death) capped at €50k.

Persistency risk is the risk that the policyholder cancels the contracts, thereby exposing the Company to lowerannual management fees than that projected in the product pricing. The Company manages this risk byensuring that its distributors only sell such policies to customers with a medium to long term investmenthorizon and through maintaining high levels of customer care. Early redemptions are reviewed and analysedto determine potential trends requiring attention.

Market risk arises for the Company on the value of the fees earned, from the consequent impact of a loss offair value resulting from adverse fluctuations in equity prices, interest rates and foreign currencies.

A number of financial risks also arise within the investment contracts and these are carried by the holders ofthese contracts. These risks are:

Market risk in respect of fluctuation in interest rates, equity prices and foreign currency rates.Credit risk in respect of exposure to counterparties.

The Company manages these risks taking into account the objectives of the investment funds in which thepolicyholders invest, as set out in the documentation given to the policyholders.

Market risk is managed on a daily basis by the investment managers who are responsible for monitoring theeffect of changes in the fair value of assets in each fund. The investment managers execute purchases andsales of securities in accordance with its expectations of future market movements. The performance of thefunds that results from the investment managers choices is monitored on a regular basis by the InvestmentCommittee.

25




Risks associated with other financial assetsThe Company holds other financial assets that are not attributable to investment contracts, as backing for itsgeneral solvency requirements and to maintain an effective working capital level whilst complying withcompany law and with the regulations and guidelines issued by the Central Bank of Ireland (see Note 10“Shareholder financial assets”).

An investment policy, which is considered by the Company to be prudent, is adopted with regard to theseassets and this is set out in policy statements which have been approved by the Board and are monitored bythe Investment Committee.

The asset allocation is determined in order to optimise the risk return within a specific risk tolerance and theassets are predominately euro-denominated short to medium term EU government bonds and bank deposits. Aproportion of the assets, within specified limits, may be invested in short term corporate bonds and equitiesand in derivatives that are associated with the Company’s structured products.

The main risks that the Company is exposed to for these assets are ‘credit risk’, ‘market risk’ and ‘liquidityrisk’.

Credit risk occurs for these assets if the counterparty is unable to pay amounts in full when due and the keyareas where the Company may be exposed are in respect of:

• Amounts due from bond issuers.• Cash balances and deposits held with credit institutions.• Receivables due from debtors and reinsurers.• Recovery of the advance payment of the Italian Policyholders’ Tax.• Policyholder financial assets.

Substantially all of the retail assets of the Company are held with two counterparties. In relation to the privateinsurance business, these are held with a number of individual counterparties. Bankruptcy or insolvency ofthese counterparties may cause the Company’s rights with respect to the investments held by thesecounterparties to be delayed or limited. The Company monitors its risk by monitoring the credit quality ofeach counterparty.

The Company does not invest in unlisted investments for the retail unit linked funds. As the Company doesnot appoint the individual custodians to the Collective Investment Schemes in which they invest, the Boardhas agreed to allow investment in such instruments only where they are regulated by a recognised regulator.

For Private Insurance policies, the investment policy allows investment in a universe of assets, some of whichmay not be regularly traded. However, the policy conditions for Private Insurance allows for the settlement ofa claim by way of an in-specie transfer, thereby allowing for the settlement of claims, even where the asset isilliquid.

Bond issuer risk is reduced by investing in bonds that are backed by an EU Government or if corporate bondsare held, these are limited to a specified limit and are restricted to those of a short term duration.

Risk exposure to credit institutions is managed by only using approved institutions.

Amounts receivable from debtors are subject to a credit control process.

26




Risks associated with other financial assets (‘continued)

Credit risk (continued)The balance remaining on the Italian Policyholders’ Tax is recoverable from deductions made from gainsmade by policyholders when they surrender their policies, and in the event that any balance remainsunrecovered after five years, an agreement has been made to transfer that balance to the parent company atface value.

Policyholder assets are the assets backing the unit-linked investment contracts and the holders of thesecontracts bear the credit risk arising from these assets.

The credit risk exposure and ratings of financial and other assets which are most susceptible to credit risk areset out in tables below.

Advance payment of ItalianPolicyholders’ Tax

Investments available for sale

Investments at fair value throughprofit or loss:

Equities

fixed income securities

Investments in Collective InvestmentSchemes **

Derivatives

Deposits, Cash & Cash equivalentsand other

Table 1 - Credit risk exposure and ratings offinancial and other assets i’hich are most susceptible to creditrisk as at 31 December 2016.

Not Assets Totalrated held for

policyholders

From From From FromAAA AA A BBB

to AA+ to to BBB to BA+

(000’s €000’s (000’s (000’s (000’s (000’s (000’s

- - -- 214,831 - 214,831

20,219 13,802 21,922 4,712 - - 60,655

- - - -- 59,062 59,062

- - - -- 907,233 907,233

- - - -- 12,297,122 12,297,122

- - - -- (1,296) (1,296)

- - - -- 208,706 208,706

- - -- 23,470 - 23,370

- 72,997 (10,426) 9,458 6,670 - 78,699

20,219 86,799 11,496 14,170 244,971 13,470,827 13,848,482

Other receivables

Cash and cash equivalents

Total assets bearing credit risk

27


Notes to the financial Statements (continued)


Risks associated with other financial assets (continued)

Credit risk (continued)

Table 2 - Credit risk exposure and ratings of fixed income securities within policyholder assets (see table 1above,) which are most susceptible to credit risk as at 3] December 2016.

Investments at fair value through profit or loss:


Total Fixed income securities bearing credit risk

From From From from TotalAAA AA A BBB


(000’s (000’s (000’s (000’s (000’s

53,299 140,314 592,092 121,528 907,233

53,299 140,314 592,092 121,528 907,233

Table 3 - Credit risk exposure and ratings of Fixed income securities within policyholder assets (see table 4below, which are most susceptible to credit risk as at 3] December 2015.

From From From From TotalAAA AA A BBB

to AA+ to to BBB to BA-f

(000’s (000’s (000’s (000’s (000’s

49,453 - 691,232 312,503 1,053,188

49,453 - 691,232 312,503 1,053,188

Investments at fair value through profit or loss:


Total Fixed income securities bearing credit risk

28





Credit risk (continued)

Table 4 - Credit risk exposure and ratings offinanciat and other assets which are most susceptible to creditrisk as at 31 December 2015.

Advance payment of ItalianPolicyholders’ Tax

Investments available for sale

Investments at fair value throughprofit or loss:

Equities


Investments in Collective InvestmentSchemes **

Derivatives

Deposits, Cash & Cash equivalentsand other

Other receivables

Cash and cash equivalents

Total assets bearing credit risk

Not Assets Totalrated held for

policyholders

From From From FromAAA AA A 11138-


(000’s (000’s (000’s (000’s (000’s (000’s (000’s

- - -- 169,788 - 169,788

30,998 16,209 26,368 5,509 - - 79,084

- - - -- 36,682 36,682

- - - -- 1,053,188 1,053,188

- - - -- 10,543,695 10,543,695

- - - -- (3,009) (3,009)

- - - -- 321,079 321,079

- - -- 20,851 - 20,851

- 9,967 48,502 19,905 8,851 - 87,225

30,998 26,176 74,870 25,414 199,490 11,951,635 12,308,583

** The Investments in Collective Investment Schemes are various Unit Linked SICAV funds which are allUCITS compliant and as a consequence are required to have an independent custodian taking custody of theassets of the SICAV. Therefore, counterparty credit risk exists to the extent of the ability of the custodian toreturn assets held. These CIS are chosen by the various asset managers, responsible for the investmentportfolio of each fund. These SICAVs are mainly domiciled in Luxembourg, Ireland, Italy, Switzerland andFrance.

29





Market risk is the risk of change in fair value of a financial instrument due mainly to fluctuations in interestrates, equity prices, and foreign currency rates.

a) Interest rate risk arises primarily from the Company’s investments in fixed income securities. Thechange in interest yields is reviewed on a regular basis when the Company prepares projections of itssolvency position.The following assets are exposed to interest rate risk:

• Deposits• Fixed income securities

The sensitivity of interest rate movements on the Company’s profits can be seen in the followingtable, by reference to an increase or decrease of 1.00% in the overall yield curve for the assets exposedto the interest rate risk at the end of the financial year.

2016 2015€000’s €000’s

Increase of 1% in overall yield:Impact on profit before tax

1,256 4,082

Decrease of 1% in overall yield:

______________

Impact on profit before tax(1,368) (2,660)

b) The Company’s net exposure to eqtiitv price risk is limited to the equity securities content of itsholdings in unit-linked funds. At 31 December 2016 and 31 December 2015 there was no suchexposure.

There is exposure to direct equity price risk through equities held by policyholders of €59m in 2016(2015: €37rn). A 1% price increase would lead to equities increasing by €591k in 2016 (2015: €367k).Such a movement would be offset by the financial liabilities - investment contracts.

There is indirect exposure to equity and other market price risk through investments in collectiveinvestment schemes of €12,297m (2015: €l0,544m) held by policyholders. A 1% price increasewould lead to CIS increasing by €123m in 2016 (2015: €105m). Such a movement would be offset bythe financial liabilities — investment contracts.

c) foreign currencj’ risk can arise dtie to fluctuations in foreign exchange rates. The Company does nothave any significant exposure to such movements as its investments are mainly denominated in Euro.For investment contracts, no direct market risk arises for the Company, as changes in the value of andincome arising from the assets and liabilities underlying these contracts are matched with the changesin the Company’s obligations to the policyholders.

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Liquidity riskThe liquidity risk is defined as risk that an entity will encounter difficulty in meeting obligations associatedwith financial liabilities that are settled by delivering cash or another financial asset.

In managing the Company’s assets and liabilities, the Company seeks to ensure that cash is at all timesavailable to seffle liabilities as they fall due. Available funds are mainly invested in call or deposit accounts ofup to six months duration and in short/medium Euro-denominated Government bonds. The Company’streasury position is reviewed on a regular basis and cash balances are maintained to meet due liabilities. TheCompany can avail of a line of credit arranged by its parent company for short term liquidity requirements thatarise from timing factors. The Company also participates in a cash-pool arrangement with Allianz SE andDeutsche Bank AG.

For investment contract redemptions, cash paid out is funded by the redemption of the linked assets supportingthe contract liability.

An analysis of the contractual maturity of the Company’s financial liabilities at 31 December 2016 is set outin the following table:

Between2016 1 year

and 2 Over 5 TotalNo stated maturity Within 1 year years years

____________

€000’s f000’s f000’s f000’s f000’sLiabilities -

investmentcontracts 13,470,827 - - 13,470,827Technicalprovisions forinsurancecontracts 32 - 32

Creditors andother payables 147,397 - - 147,397Corporationtax payable 428 - 428

Total 13,470,859 147,825 - - 13,618,684

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Liquidity risk (continued)

The table below sets out comparative contractual maturity data as at 31 December 2015:

Between2015 1 year

and 2 Over 5 TotalNo stated maturity Within 1 year years years

____________

€000’s €000’s €000’s €000’s €000’sLiabilities -

investmentcontracts 11,951,635

-- 11,951,635Technical

provisions forinsurancecontracts

--

Creditors andother payables

133,711- 133,711Corporation tax

payable 109- 109

Total 11,951,635 133,820 - - 12,085,455

Where the liabilities - investment contracts are classified as having “no stated maturity”, the policies are wholeof life contracts, which can be surrendered at any time, subject to penalty charges and notice periods as set outin the policy documentation. Outwith the first three months, policyholders can request disinvestment of theirfunds with five working days’ notice.

3. Net premiums written and earned

2016 2015E’OOO €‘OOO

Insurance premium incomeGross premium written and earned 2,585 808Less premiums ceded to reinsurers (568) (190)Net premium written and earned 2,017 618

At the start of 2015, the Company commenced sales of a new version of the Challenge product, ChallengePlus. This is similar to the original Challenge product but with an enhanced death benefit, Instead of paying anadditional death benefit of 1% of the fund value to lives assured under 66 years old, the death benefit offeredis 10% of the net investment (difference between the premiums paid and any partial surrenders paid until thenotification of death), capped at €50k. This additional death rider benefit is unbundled and treated asinsurance under If RS 4, with the investment element accounted for as investment under 1AS39.

32



3. Net premiums written and earned (continued)

As permitted per the Company’s accounting policy for certain products under IFRS 4, premiums relating tothe death benefit are unbundled from total premiums collected and presented in the Statement ofComprehensive Income as insurance premium income. For the financial year ended 31 December 2016premium income of €2,585m (2015: €3,309m) relates to investment contracts and are not included in “Netpremiums written and earned” in the Statement of Comprehensive Income, in accordance with 1AS39 (seeNote 16 “Financial liabilities”).

4. Investment return

2016 2015

f’OOO €‘OOO

Policyholder investment return

Investment income from equities 1,392 1,530Interest income from fixed income securities 6,457 264Investment income from collective investment funds 31,182 24,496Income from other financial assets 8,655 9,718Interest income from deposits 18Net realised gains on financial assets 110,733 366,81 1Net unrealised gains/(losses) on financial assets 233,931 (190,075)

392,350 212,762

Shareholder investment return

Interest income from financial assets 1,548 1,621Interest income from cash 56 196Net realised gains on financial assets 252 678

1,856 2,495

394,206 215,257

ii



5. Fees and other income/(expense)

Note 2016 2015

f’OOO €‘OOO

Fees from investment contracts 228,841 263,499Other expense ($8) (371)Movement in deferred income reserve 18 2,993 (4,073)

231,746 259,055

6. Acquisition and administration expenses

2016 2015

€‘OOO €‘OOO

Acquisition costs 32,264 1 8,659Change in deferred acquisition costs (14,597) (1,672)Administration expenses 170,527 165,472

188,194 182,459

All of the acquisition costs are in respect of commissions paid and sates inducements on new business.

Administration expenses 2016 2015

€‘OOO €‘OOO

Commission expenses - ongoing 145,373 134,573Operating expenses:

Wages and salaries 2,517 2,302Social welfare costs 228 211Pension costs 159 147Fund expenses borne by policyholders 3,052 3,570Third party administration expenses 11,315 9,238Investment management fees and expenses 7,883 15,431

170,527 165,472

34



6. Acquisition and administration expenses (continued)

Included in the administration expenses are the following:

Auditor’s remuneration (excluding VAT) 2016 2015

€‘OOO €‘OOO

Audit of statutory accounts 116 65Other assurance services 46 5Tax advisory services 8 14

170 84

Directors’ emolumentsSalaries and related benefits 263 468fees as directors 130 124Fees for other services 48 48

The Company had a consultancy arrangement with the firm of one Director to whom fees (€48k) (2015:€48k), are paid for non-Director services.

The average monthly number of employees during the year was as follows: 2016 2015

Administration 29 25Finance 6 5

35 30

7. Taxation 2016 2015

€‘OOO €‘OOO

Current tax expense 6,306 10,410

Total corporation tax expense 6,306 10,410

Deferred tax recorded in other comprehensive income 16 (174)

35



7. Taxation (continued) 2016 2015

€‘OOO €‘OOOReconciliation of effective tax charge:

Profit before taxation 50,437 83,278

Corporation tax at the standard rate of 12.5% 6,305 10,410Effects of

Capital allowance in excess of depreciation (1) (1)Disallowed expenses 2 1

Corporation tax charge 6,306 10,410

Deferred Tax Asset 2016 2015

€‘OOO €‘OOO

Balance at 1 January 165 (9)Movement during the financial year recognised in othercomprehensive income (16) 174

Balance at 31 December 149 165

8. Advance payment of Italian Policyholders’ Tax

The Company operates in Italy on a “freedom of services” basis and in 2005 opted to implement the sostittitod’imposta tax regime. The sostituto d’irnposta tax regime entails an annual “advance payment” to the Italianfiscal authorities of an amount currently eqtial to 0.45 % (2015: 0.45 %) of the Company’s financial liabilities- investment contracts, as at the year end. Each annual advance payment can be recovered from any exit taxsubsequently deducted from policyholders or by offset against taxes payable to Italian revenue within a periodof five years. To the extent that an unrecovered balance remains after five years have elapsed, the balance ofthe advance payment made five years earlier can be sold to the parent company at face value for recoveryagainst their Italian tax liabilities €214,831k (2015: €169,788k).

2016 2015Asset Note €‘OOO €‘OOO

Balance at 1 January 169,788 135,457

Net payable in respect of the financial year 19 54,202 53,783

Recoveries in respect of the financial year (9,159) (19,452)

Balance at 31 December 214,831 169,788

36



8. Advance payment of Italian Policyholders’ Tax (continued)

2016 2015Liability Note €‘OOO €‘OOO

Balance at 1 January 53,783 40.447

Net payable in respect of the financial year 19 54,202 53,783

Paid during the financial year (53,783) (40,447)


9. Deferred acquisition costs 2016 2015€‘OOO €‘OOO

Balance at 1 January 44,035 42,363

Acquisition costs incurred in the financial year 32,264 16,459

Amount charged to Statement of Comprehensive Income (17,667) (14,787)


10. Financial assets Market MarketValue Value

Shareholder financial assets 2016 2015€‘OOO €‘OOO

Investments available for sale 60,655 79,084

60,655 79,084

See Note 2 Financial risks and risk management, Risks associated with other financial assets on page 26.

Policyholder financial assets 2016 2015

€‘OOO €‘OOOInvestments at fair value through profit or lossEquities 59,062 36,682Fixed income securities 907,233 1,053,188Collective Investment Schemes 12,297,122 10,543,695Derivative Instruments (1,296) (3,009)Deposits, Cash & Cash Equivalents and Others 208,706 321,079

13,470,827 11,951,635

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11. Other receivables 2016 2015

f’OOO €‘OOOAmounts falling clue within one yearManagement fees receivable from the funds 20,081 18,021Accrued interest receivable 725 858Other 2,664 1,972

23,470 20,85112. Fair value disclosures

The Company classifies fair values using the following fair value hierarchy that reflects the significance of theinputs used in making the fair value measurements:

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.Level 2: Valuation techniques based on observable inputs, either directly or indirectly.Level 3: Valuation techniques using significant unobservable inputs.

There were no Level 3 assets at 31 December 2016 (2015: €nil).

The table below analyses financial instruments, measured at fair value at the end of 2016, by the level in thefair value hierarchy into which the fair value measurements is categorised:

Total fairFinancial assets as at 31 December 2016 value Level 1 Level 2

€‘OOO €‘OOO €‘OOO


— Available-for-sale investments 60,655 60,655 -

Government and governmentagencybonds 15,114 15,114 -

Corporate bonds 45,541 45,541 -

Policyholder financial assets 13,470,827 12,979,962 490,865Equities 59,062 59,062 -

fixed income securities 907,233 907,233 -

Collective Investment Schemes 12,297,122 11,806,257 490,865Derivative Instruments (1,296) (1,296) -

Deposits, Cash & CashEquivalents and Others 208,706 208,706 -

Total Financial Assets 13,531,482 13,040,617 490,865

3$


Notes to the financial Statements (continued]

12. Fair value disclosures (contiutted)

Financial liabilities Total fairas at 31 December 2016 value Level 1 Level 2


Financial liabilities - investment contracts 13,470,827 13,470,827

Total Financial Liabilities 13,470,827 - 13,470,827

Total fairFinancial assets as at 31 December 2015 value Level 1 Level 2



— Available-for-sale investments 79,084 79,084 -

Government and governmentagency bonds 22,864 22,864 -

Corporate bonds 56,220 56,220 -

Policyholder financial assets 11,951,635 11,572,072 379,563Equities 36,682 36,682 -

Fixed income securities 1,053,188 1,053,188 -

Collective Investment Schemes 10,543,695 10,164,132 379,563Derivative Instruments (3,009) (3,009) -

Deposits, Cash & CashEquivalents and Others 321,079 321,079 -

Total Financial Assets 12,030,719 11,651,156 379,563

Financial liabilities Total fairas at 31 December 2015 value Level 1 Level 2


Financial liabilities - investment contracts 11,951,635 11,951,635

Total Financial Liabilities 11,951,635 11,951,635

39



12. Fair value disclosures (continued)

There were no transfers between levels in 2016 and 2015.

With the exception of Advanced Payment of Italian Policyholders’ Tax, there are no differences between fairvalues and carrying amounts of other financial assets at the Statement of Financial Position date. The fairvalue of the Advanced Payment of Italian Policyholders’ Tax is €214,967k (carrying value: €214,831k) (2015:€1 66,779k (carrying value: €1 69,788k).

13. Share capital — equity

2016 2015

€‘OOO €‘OOOAuthorised.’

5,000,000 ordinary shares of€1 each 5,000 5,000

Issued

5,000,000 ordinary shares of€1 each 5,000 5,000

14. Capital contributions received and dividend paid

The Company received no capital contributions during the year (2015: €NiI).

During the year ended 31 December 2016, the Company paid a €20m (2015: €NiI) dividend to the immediateparent Allianz S.p.A in respect of the financial year ended 31 December 2016, approved by the Board ofDirectors.

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15. Capital position statement

Effective from 1 January 2016, the Solvency II Directive replaced the Solvency I regulatory solvencyrequirements. The Company has assessed its overall solvency needs using the Solvency II basis. This coversthe preparation of the Solvency II Balance Sheet (which differs from the IFRS balance sheet) and theSolvency Capital Requirement (“SCR”)/Minimum Capital Requirement (“MCR”). For the purposes ofcalculating its Solvency II Pillar I capital requirements, the SCR is calculated by applying the Standardformula in accordance with the requirements set out in Regulation 114 of SI 485 of 2015. At the 31 December2016, the Company’s available capital resources were in excess of the regulatory capital requirements on aSolvency II basis.

The Company’s capital position is above the Board of Director’s target management ratio of 170% of SCR asat 31 December 2016.

The Company maintains a capital structure with a combination of share capital, capital contributions andretained profits, consistent with the Company’s risk profile and the regulatory and market requirements of itsbusiness.

The Company is regulated in Ireland by the Central Bank of Ireland and is required to observe the rules for theamount and structure of the solvency capital for the business that it carries on.

The Company carries out regular projections of its capital adequacy and these are reviewed by the Board toensure that satisfactory levels of cover are maintained. Capital adequacy and solvency cover are reported tothe Central Bank of Ireland on a quarterly and annual basis.

No instances of non-compliance with solvency capital requirements were reported by the Company to theCentral Bank of treland during the year.

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16. financial liabilities 2016 2015

€‘OOO €‘OOOInvestment contracts:Balance at 1 January 11,951,635 9,810,183Premiums collected 2,584,630 3,309,350Change in investment contract liabilities 389,299 209,193Claims paid (1,246,578) (1,114,477)fees paid by the unit funds (231,428) (264,308)Sales inducements 23,269 1,694

Balance at 31 December 13,470,827 11,951,635

17. Technical provisions for insurance contracts

2016 2015Insurance contracts: €‘OOO €‘OOOBalance at 1 January

- -

Movement during the year 32Balance at 31 December 32

18. Deferred income 2016 2015

€‘OOO €‘OOO

Balance at 1 January 35,211 31,138Movement during the financial year (2,993) 4,073


The income that is deferred is in respect of investment contracts on which a front-end fee applied in relation toservices to be provided in futtire periods. The deferred income reserve is amortised over the anticipated life ofthe contracts.

The amount of deferred income that is expected to be earned more than 12 months after the Statement offinancial Position date is €24,339,080 (2015: €26,951,467).

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19. Creditors and other payables 2016 2015

Note €‘OOO €‘OOOAmounts fatting due within one yearAmounts due to group companies 15,379 13,354Advance payment of Italian Policyholders’ Tax 8 54,202 53,783Premium deposits 30,393 23,950Claims payable 43,329 37,364Value Added Tax 141 51Social welfare I PAYE 90 $1Other creditors and accruals 3,863 5,128

147,397 133,711

Amounts due to group companies are principally in respect of initial and ongoing commissions and investmentmanagement fees.

20. Ultimate parent undertaking and parent undertaking of larger group

The Company’s ultimate parent undertaking is Allianz SE, a company incorporated in Germany. TheCompany’s immediate parent undertaking is Allianz S.p.A., a company incorporated in Italy.

The largest group in which the results of the Company are consolidated is that headed by Allianz SE,incorporated in Germany. The consolidated accounts of this group are available to the public and may beobtained from Allianz SE, Konigstrasse 28, 80802 Munich, Germany.

The smallest group in which the results of the Company are consolidated is that headed by Allianz S.p.A., acompany incorporated in Italy. The consolidated accounts of this group are available to the public and may beobtained from Allianz S.p.A., Largo Ugo Irneri 1, Trieste, Italy.

21. Related party transactions

The Company received/provided a number of services from related parties. The related party activities whichthe Company now has are as follows:

— The Company has agreements with Allianz S.p.A., Allianz Global Investors GmbH, Investitori SGR S.p.A.and PIMCO Europe Ltd for the provision of fund management services;

— The Company has an agreement with Allianz S.p.A. for the provision of fiscal, legal and actuarial services;— The Company has an agreement with Allianz Managed Operations & Services SE for iT services;— The Company has agreements with Allianz Bank Financial Advisors S.p.A. for the provision of banking

and custodian services and for product distribution;— The Company has agreements with Allianz Ireland PLC for renting office space and the provision of

internal audit services;— The Company has an agreement with Allianz Global Life dac for the provision of compliance, office space

and other infrastructural services.

43



21. Related party transactions (continited)

Transactions with Directors

The Directors’ compensations are as follows:2016 2015

€‘OOO €‘OOO

Salaries and related benefits 263 46$Fees as directors 130 124Fees for other services 48 48

The above figures reflect the remuneration paid by the Company to all Board members.

Transactions with other related parties:

Name of the Company Relationship Receivable! Expense Income Receivable!(payable) at (payable) receivable (payable) at

1 January by the by the Payments 31 December2016 Company Company !(Receipts) 2016

€‘OOO €‘OOO €‘OOO €‘OOO €‘OOOAllianz SpA. parent (166) (125) - 266 (25)

Allianz Managed Operations & Services SE group (244) (263) - 126 (381)

Allianz Bank financial Advisors S.p.A. group (10,551) (154,419) - 152,389 (12,581)

Allianz Ireland PLC group (48) (514) - 524 (38)

Allianz Global Life dac group 3$ - 421 (452) 7

Allianz Global Investors GmbH group (1,434) (3,631) - 3,549 (1,516)

P[MCO Europe Ltd group (271) (772) - $41 (202)

Investitori SGR S.p.A. group (67$) (2,542) - 2,584 (636)

€9,$2$rn (2015: €$,369m) of the €13,471m (2015: €11,952m) policyholder assets at year end were managedby related Allianz SE companies. Total realised and itnrealised gains on policyholder assets managed byrelated Allianz SE companies are €236m (2015: €67m). €7m (2015: €9m) of the shareholder cash and cashequivalents at year end were managed by Allianz Bank Financial Advisors S.p.A. and a further €68m (2015:€39m) was managed throtigh an inter-company cash-pool agreement with Allianz SE for the year ended 2016and with Deutsche Bank in 2015.

44


Notes to the Financial Statements (contintted)

22. Disclosure of interests in unconsolidated structured entities

Included in policyholder financial assets are investments in Collective Investment Schemes “CIS” which maybe considered to be interests in unconsolidated structured entities under IFRS 12 ‘Disclosure of interests inunconsolidated structured entities’. The CIS are predominantly regulated SICAV funds which are all UCITScompliant. These CIS are chosen by the various asset managers, responsible for the investment portfolio ofeach fund. These SICAVs are mainly domiciled in Luxembourg, Ireland, Italy, Switzerland and France.

The table below sets out the Country of domicile of these CIS investments:

Country Value of Value ofTotal CIS Total CIS

31 December 31 December2016 2015

E’OOO ,000

Luxembourg 8,503,170 7,188,596Ireland 2,596,370 1,928,091Italy 723,418 1,050,892Switzerland 187,660 146,174France 159,260 142,636United Kingdom 118,409 5,348Other 8,835 81,958Total CIS 12,297,122 10,543,695

The table below sets out the interest held by the policyholders with regard to the geographical region wherethe underlying investments of the CIS are held as at 31 December 2016:

Geographical Region Percentage Value ofof underlying underlying

CIS on CIS onlookthrough lookthrough

basis basis€‘OOO

Europe 54.6% 6,722,699North America 25.0% 3,075,387United Kingdom 7.4% 9 12,1 19Asia 7.1% 870,066South America 1.9% 230,145Central America 1.0% 120,593Cayman Islands 1.0% 117,424Australia 0.8% 97,555Middle East 0.4% 53,809British Virgin Islands 0.3% 37,994Africa 0.2% 26,111South Africa 0.2% 25,907Other 0.1% 7,313Total CIS 100.0% 12,297,122

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22. Disclosure of interests in unconsolidated structured entities (continued)

The CIS are of varying sizes and are all financed by investor equity, having been established for the purposeof collective investment activity.

The maximum gross exposure to loss is the carrying value of €12,297m (2015: €10,544m) but the netexposure to loss borne by the shareholder of the Company is €nil as the investments are held on behalf of thepolicyholder.

The majority of the units in the CIS can be redeemed daily.

The policyholder financial assets as at 31 December 2016 were €l3,471m of which €12,297m were made upof CIS. At 31 December 2016 €9,$28m (2015: €$,369m) of the policyholder financial assets were managedby other entities in the Allianz Group.

During the financial year, the Company or policyholders did not provide financial support to unconsolidatedstructured entities and has no current intention of providing financial or other support.

23. Contingencies

There were no contingent liabilities at 31 December 2016 (2015: €Nil).

24. Subsequent events

On 28 february 2017, Philip Clarke resigned as Company Secretary and Francis O’Hara was appointed asCompany Secretary on 1 March 2017. There were no events subsequent to the year end which requiredisclosure in, or amendment to, these financial statements.

25. Approval of financial statements

The Board of Directors approved these financial statements on 23 March 2017.

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