GIM2200 - Accounting framework: example of annual accounting
A simple annual account might look as follows. For ease of presentation some headings are missing, and comparative figures for the previous year are omitted, although they must be shown in published accounts.
Direct Insurance Co Ltd - Accounts to 31 December 2008
| Technical Account - General Business | £m | £m | £m |
|---|---|---|---|
| Earned premiums net of reinsurance | - | - | - |
| Gross premiums | 95 | - | - |
| Less: outward reinsurance premiums | (20) | 75 | |
| Gross change in UPP and URP | 8 | - | - |
| Less: reinsurance | (2) | 6 | 69 |
| Investment return allocated from non-technical a/c | - | - | 8 |
| Claims incurred net of reinsurance | - | - | - |
| Gross amount | 40 | - | - |
| Less: reinsurers share | (10) | 30 | - |
| Change in provision for claims outstanding | - | - | - |
| Gross amount | 50 | - | - |
| Less: reinsurers share | (20) | 30 | - |
| - | - | - | (60) |
| Net operating expenses | - | - | - |
| Acquisition costs | - | 8 | - |
| Change in deferred acquisition costs | - | (1) | - |
| Administrative expenses | - | 13 | - |
| Reinsurance commissions receivable | - | (1) | (19) |
| Other technical charges, net of reinsurance | - | - | (2) |
| Result of the general business technical account transferred to the non-technical account | - | - | (4) |
| Non-Technical Account | £m | £m |
|---|---|---|
| Balance on the general business technical a/c | - | (4) |
| Investment income | - | - |
| Income from land and buildings | 7 | - |
| Income from other investments | 14 | 21 |
| Unrealised gains on investments | - | 3 |
| Investment expenses and charges | - | - |
| Investment management expenses | 1 | - |
| Losses on the realisation of investments | 1 | (2) |
| Investment return transferred to the technical a/c | - | (8) |
| Profit on ordinary activities before tax | - | 10 |
| Tax on profit on ordinary activities | - | (3) |
| Profit on ordinary activities after tax | - | 7 |
The technical provisions would appear under Liabilities on the balance sheet as follows:
| Technical Provisions at 31 December | 2008 | 2007 |
|---|---|---|
| - | £m | £m |
| Provision for Unearned premiums | - | - |
| Gross amount | 44 | 36 |
| Less reinsurance | (6) | (4) |
| - | 38 | 32 |
| Claims outstanding | - | - |
| Gross amount | 300 | 250 |
| Less reinsurance | (190) | (170) |
| - | 110 | 80 |
The deferred acquisition costs should be separately disclosed on the balance sheet as an asset.