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the generali group applies this accounting treatment to the insurance liabilities as 599166

Assicurazioni Generali S.p.A. (2008)

Notes to the consolidated financial statements [extract]

Part D

Summary of significant accounting policies [extract]

Note 1.2.1

Insurance contracts acquired in a business combination or portfolio transfer [extract]

In case of acquisition of non-life insurance contracts in a business combination or portfolio transfer, the group recognises an intangible asset, i.e. the value of the acquired contractual relationships (Value of Business Acquired).

The VOBA is the present value of the pre-tax future profit arising from the contracts in force at the purchase date, taking into account the probability of renewals of the one year contracts. The related deferred taxes are accounted for as liabilities in the consolidated balance sheet.

The VOBA is amortized over the effective life of the contracts acquired, by using an amortization pattern reflecting the expected future profit recognition. Assumptions used in the development of the VOBA amortization pattern are consistent with the ones applied in its initial measurement. The amortization pattern is reviewed on a yearly basis to assess its reliability and to verify the consistency with the assumptions used in the valuation of the corresponding insurance provisions.

The difference between the fair value of the insurance contracts acquired in a business combination or a portfolio transfer, and the insurance liabilities measured in accordance with the acquirer’s accounting policies for the insurance contracts that it issues is recognised as intangible asset and amortized over the period in which the acquirer recognises the corresponding profits.

The Generali Group applies this accounting treatment to the insurance liabilities assumed in the acquisition of insurance portfolios. Therefore, the assumed insurance liabilities are recognized in the balance sheet according to the acquirer’s accounting policies for the insurance contracts that it issues. The intangible assets are not in the scope of IAS 38 and IAS 36.

The future VOBA recoverable amount is tested on yearly basis.

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