Insurers Respond Well To Challenges of IFRS, But Experimentation Leads to Less Clear Reporting: PwC Survey

Toronto, July 24, 2006 – Major global insurers have responded well to the enormous challenge in moving to International Financial Reporting Standards (IFRS) and many companies have gone beyond the minimum of disclosure required to comply. However, while the reports are considerably longer and provide valuable information, a new survey by PricewaterhouseCoopers (PwC) found that many of the financial statements are less clear and harder to follow than before as a result of the experimentation in implementing some of the changes and the different approaches taken in their presentation.

IFRS are reporting standards which have been adopted by the International Accounting Standards Board (IASB), an independent, international organization supported by the professional accountancy bodies. The objective is to achieve uniformity and transparency in the accounting principles that are used by businesses and other organizations for financial reporting around the world. In Canada, IFRS will converge with Canadian GAAP over a transitional period in the next five years.

The move to IFRS as a statutory requirement in the E.U. and other parts of the world is changing the way insurers present their business and are judged by analysts, investors and other key users of their accounts. The findings of this survey underline how important it is for insurers to work together to enhance the clarity, consistency and usability of their financial statements, especially in areas where the new regime leaves insurers substantially free to choose the nature or format of presentation.

Philippe Thieren, a partner with PwC’s Montreal office, says: “Globally, there is a great deal more work to come for insurers, given that IFRS is still only in Phase I and a harmonized standard for the valuation of liabilities has yet to be finalized. In future, IFRS will significantly affect the way financial reporting will be carried out by companies in Canada. By looking at how others around the world are adapting to the requirements we can better prepare for its implementation.”

The survey found that with the exception of the valuation of insurance liabilities and the corresponding impact on investment asset classifications, there was relatively little other diversity in accounting policy but in some cases, surprising diversity in detailed disclosures.

Furthermore, the survey found that some areas which were expected to result in considerable financial reporting changes, such as segmental disclosures and disclosures required on insurance risk, and assumptions used, had very little impact.

Notably, almost all of the insurers in the survey identified the expected increase in volatility from the fair valuation of assets and disclosed an alternative measure of profit either within the audited financial statements or within the financial review to mitigate the effect of the volatility.

“Progress in implementing IFRS will be best achieved through close co-operation among insurers and the active engagement of preparers, users and the IASB. Canadian insurers and regulators will be keeping a close watch on the developments to ensure that they apply the right methodology in future.”

For a copy of – “Reporting under the new regime: A survey of 2005 IFRS insurance annual reports”, please contact Carolyn Forest, carolyn.forest@ca.pwc.com, (416) 814-5730.

The 26 companies covered in the survey are all large groups chosen to represent different segments of the industry including life, non-life and bancassurance businesses across a range of countries worldwide. They include companies that have applied IFRS in the past and others that have published year-end financial statements on an IFRS basis for the first time. The sample includes some companies that are also listed in the U.S. as foreign private issuers. Analysis is based on the translated English version of the report and accounts where these have originally been provided in another language.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com ) and its related entities have more than 4,300 partners and staff in offices across the country.