The areas of greatest subjectivity and interest within the financial statements of Large European Insurance Groups

Many insurance groups’ financial close as at 31 December 2008 was performed in the depths of a financial crisis and was heavily impacted by unfavourable circumstances, such as:

• The beginning of a recession for the most significant global economies;
• Decrease in interest rates;
• Increase of credit risk;
• Lack of liquidity for some assets;
• Fall of debt and equity instruments’ market value;
• Very high volatility of markets.

Given the uncertainty in the financial markets, analysts’ and investors’ expectations were raised in terms of the transparency of information, considering insurers’ intrinsic risks as financial investors, as well as the inherently judgmental elements of insurers’ financial statements.

Against this background Mazars have analysed the financial statements of several of the largest European insurance groups, considering areas of greatest subjectivity and interest such as:

• Valuation of financial instruments;
• Groups’ exposure to fi nancial risk;
• Information on solvency margin indicators and Embedded Value.

Our analysis has allowed us to assess the achievement of IFRS’ objectives even in a stressed environment i.e. the production of comprehensible, relevant & comparable financial statements.