CONSOLIDATED CONDENSED BALANCE SHEET Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars

Transcription

1

2

3 CONSOLIDATED CONDENSED BALANCE SHEET Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No. Note CASH AND CASH EQUIVALENTS 3,408 2, QUOTED INVESTMENTS: (a) Bonds and Debentures i. Held to maturity - 3,036 ii. Other 9,599 7,894 (b) Total Bonds and Debentures 9,599 10,930 (c) Equities i. Common stocks - - ii. Preferred stocks - - iii. Mutual funds 3,576 - (d) Total equities 3,576 - (e) Other quoted investments - 3,321 (f) Total quoted investments 13,175 14, UNQUOTED INVESTMENTS: (a) Bonds and Debentures i. Held to maturity ii. Other (b) Total Bonds and Debentures - - (c) Equities i. Common stocks ii. Preferred stocks iii. Mutual funds (d) Total equities - - (e) Other unquoted investments 1,116 1,521 (f) Total unquoted investments 1,116 1, INVESTMENTS IN AND ADVANCES TO AFFILIATES (a) Unregulated entities that conduct ancillary services (b) Unregulated non-financial operating entities (c) Unregulated financial operating entities (d) Regulated non-insurance financial operating entities (e) Regulated insurance financial operating entities - - (f) Total investments in affiliates - - (g) Advances to affiliates 5,135 6,417 (h) Total investments in and advances to affiliates 5,135 6, INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE: (a) First liens (b) Other than first liens (c) Total investments in mortgage loans on real estate POLICY LOANS REAL ESTATE: (a) Occupied by the company (less encumbrances) (b) Other properties (less encumbrances) (c) Total real estate COLLATERAL LOANS 9. INVESTMENT INCOME DUE AND ACCRUED

4 CONSOLIDATED CONDENSED BALANCE SHEET Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No. Note ACCOUNTS AND PREMIUMS RECEIVABLE: (a) In course of collection (b) Deferred - not yet due (c) Receivables from retrocessional contracts (d) Total accounts and premiums receivable REINSURANCE BALANCES RECEIVABLE: (a) Foreign affiliates (b) Domestic affiliates (c) Pools & associations (d) All other insurers (e) Total reinsurance balance receivable FUNDS HELD BY CEDING REINSURERS 13. SUNDRY ASSETS: (a) Derivative instruments (b) Segregated accounts companies - long-term business - variable annuities 72,240 76,629 (c) Segregated accounts companies - long-term business - other 183, ,436 (d) Segregated accounts companies - general business (e) Deposit assets (f) Deferred acquisition costs (g) Net receivables for investments sold (h) Other Sundry Assets (Specify) (i) Other Sundry Assets (Specify) (j) Other Sundry Assets (Specify) (k) Total sundry assets 255, , LETTERS OF CREDIT, GUARANTEES AND OTHER INSTRUMENTS (a) Letters of credit (b) Guarantees (c) Other instruments (e) Total letters of credit, guarantees and other instruments TOTAL 279, ,837

5 CONSOLIDATED CONDENSED BALANCE SHEET Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No. Note TOTAL INSURANCE RESERVES, OTHER LIABILITIES AND STATUTORY CAPITAL AND SURPLUS 16. UNEARNED PREMIUM RESERVE (a) Gross unearned premium reserves (b) Less: Ceded unearned premium reserve i. Foreign affiliates ii. Domestic affiliates iii. Pools & associations iv. All other insurers (c) Total ceded unearned premium reserve - - (d) Net unearned premium reserve LOSS AND LOSS EXPENSE PROVISIONS: (a) Gross loss and loss expense provisions (b) Less : Reinsurance recoverable balance i. Foreign affiliates ii. Domestic affiliates iii. Pools & associations iv. All other reinsurers (c) Total reinsurance recoverable balance - - (d) Net loss and loss expense provisions OTHER GENERAL BUSINESS INSURANCE RESERVES 19. TOTAL GENERAL BUSINESS INSURANCE RESERVES - - LONG-TERM BUSINESS INSURANCE RESERVES 20. RESERVE FOR REPORTED CLAIMS 21. RESERVE FOR UNREPORTED CLAIMS 22. POLICY RESERVES - LIFE 12,469 13, POLICY RESERVES - ACCIDENT AND HEALTH 24. POLICYHOLDERS' FUNDS ON DEPOSIT 25. LIABILITY FOR FUTURE POLICYHOLDERS' DIVIDENDS 26. OTHER LONG-TERM BUSINESS INSURANCE RESERVES 27. TOTAL LONG-TERM BUSINESS INSURANCE RESERVES (a) Total Gross Long-Term Business Insurance Reserves 12,679 13,139 (b) Less: Reinsurance recoverable balance on long-term business (i) Foreign Affiliates (ii) Domestic Affiliaties (iii) Pools and Associations (iv) All Other Insurers 210 (90) (c) Total Reinsurance Recoverable Balance 210 (90) (d) Total Net Long-Term Business Insurance Reserves 12,469 13,229

6 CONSOLIDATED CONDENSED BALANCE SHEET Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No. Note OTHER LIABILITIES 28. INSURANCE AND REINSURANCE BALANCES PAYABLE COMMISSIONS, EXPENSES, FEES AND TAXES PAYABLE LOANS AND NOTES PAYABLE 31. (a) INCOME TAXES PAYABLE (b) DEFERRED INCOME TAXES 32. AMOUNTS DUE TO AFFILIATES 33. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES FUNDS HELD UNDER REINSURANCE CONTRACTS: 35. DIVIDENDS PAYABLE 36. SUNDRY LIABILITIES: (a) Derivative instruments (b) Segregated accounts companies 255, ,065 (c) Deposit liabilities (d) Net payable for investments purchased (e) Other sundry liabilities (specify) (f) Other sundry liabilities (specify) (g) Other sundry liabilities (specify) (h) Total sundry liabilities 255, , LETTERS OF CREDIT, GUARANTEES AND OTHER INSTRUMENTS: (a) Letters of credit (b) Guarantees (c) Other instruments (d) Total letters of credit, guarantees and other instruments TOTAL OTHER LIABILITIES 257, , TOTAL INSURANCE RESERVES AND OTHER LIABILITIES 269, ,182 CAPITAL AND SURPLUS 40. TOTAL CAPITAL AND SURPLUS 9,662 11, TOTAL 279, ,

7 CONSOLIDATED CONDENSED STATEMENT OF INCOME Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No GROSS PREMIUMS AND OTHER CONSIDERATIONS: (a) Direct gross premiums and other considerations 2,135 1,335 (b) Assumed gross premiums and other considerations (c) Total gross premiums and other considerations 2,135 1, PREMIUMS CEDED 2,153 1, NET PREMIUMS AND OTHER CONSIDERATIONS: (a) Life (18) (183) (b) Annuities (c) Accident and health (d) Total net premiums and other considerations (18) (183) 15. OTHER INSURANCE INCOME 1,457 1, TOTAL LONG-TERM BUSINESS INCOME 1,439 1,406 LONG-TERM BUSINESS DEDUCTIONS AND EXPENSES 17. CLAIMS - LIFE 18. POLICYHOLDERS' DIVIDENDS 19. SURRENDERS 20. MATURITIES 1, ANNUITIES 22. ACCIDENT AND HEALTH BENEFITS 23. COMMISSIONS OTHER TOTAL LONG-TERM BUSINESS DEDUCTIONS AND EXPENSES 2,232 1, INCREASE (DECREASE) IN POLICY RESERVES (ACTUARIAL LIABILITIES): (a) Life (760) (531) (b) Annuities (c) Accident and health (d) Total increase (decrease) in policy reserves (760) (531) 27. TOTAL LONG-TERM BUSINESS EXPENSES 1, NET UNDERWRITING PROFIT (LOSS) - LONG-TERM BUSINESS (33) 736

8 CONSOLIDATED CONDENSED STATEMENT OF INCOME Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No COMBINED NET UNDERWRITING RESULTS BEFORE THE UNDERNOTED ITEMS (33) 736 UNDERNOTED ITEMS 30. COMBINED OPERATING EXPENSE (a) General and administration 3,155 1,793 (b) Personnel cost (c) Other (d) Total combined operating expenses 3,155 1, COMBINED INVESTMENT INCOME - NET 810 1, COMBINED OTHER INCOME (DEDUCTIONS)- MI SHARE 174 (86) 33. COMBINED INCOME BEFORE TAXES (2,204) (45) 34. COMBINED INCOME TAXES (IF APPLICABLE): (a) Current - (b) Deferred (c) Total COMBINED INCOME BEFORE REALIZED GAINS (LOSSES) (2,204) (45) 36. COMBINED REALIZED GAINS (LOSSES) COMBINED INTEREST CHARGES 38. NET INCOME (2,204) (45)

9 CONSOLIDATED CONDENSED STATEMENT OF CAPITAL AND SURPLUS Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars LINE No CAPITAL: (a) Capital Stock (i) Common Shares authorized 250,000 shares of par value $ each issued and fully paid 250,000 shares (ii) (A) Preferred shares: authorized value fully paid aggregate liquidation value for shares of par each issued and shares (B) Preferred shares issued by a subsidiary: authorized shares of par value each issued and fully paid shares aggregate liquidation value for (iii) Treasury Shares repurchased value shares of par each issued (b) Contributed surplus 21,402 21,402 (c) Any other fixed capital (i) Hybrid capital instruments (ii) Guarantees and others (iii) Total any other fixed capital (d) Total Capital 22,202 22, SURPLUS: (a) Surplus - Beginning of Year (10,623) (10,513) (b) Add: Income for the year (2,204) (45) (c) Less: Dividends paid and payable (d) Add (Deduct) change in unrealized appreciation (depreciation) of investments 228 (65) (e) Add (Deduct) change in any other surplus (f) Surplus - End of Year (12,441) (10,623) 3. MINORITY INTEREST (99) TOTAL CAPITAL AND SURPLUS 9,662 11,655

10 PART 1 - GENERAL NOTE TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Argus International Life Bermuda Limited, (the "Insurer") is a wholly owned subsidiary of Argus Group Holdings ( the Parent ), a Bermuda public company. The Insurer is a registered Segregated Accounts Company under the Argus International Life Insurance Limited Consolidation and Amendment Act The Insurer is a shareholder of the following subsidiaries: Name of Subsidiary % of Ownership Country of Incorporation and Place of Business Bermuda Life Worldwide Limited 100% Bermuda Argus Life Insurance Limited 74% Bermuda 2. The Insurer offers variable life insurance products to trusts, private companies or other eligible entities located in Bermuda or in other jurisdictions where the Insurer deems that the laws do not prohibit the ownership or sale of the insurance. The majority of policies are issued to residents of the U.S. if permitted in the state of residence. The variable life insurance products include segregated asset accounts for investment options with a death benefit. The Insurer purchases reinsurance protection such that the reinsured net amount at risk for each insured is 100% excess of up to $100,000 retention. The reinsured net amount at risk is defined as the selected face amount of each policy less the account value less the retained amount. 3. These condensed general purpose financial statements are prepared in accordance with rule 17A (2A) of the Insurance Act 1978 (the Act ) and the Insurance Accounts Rules 2016 (the Legislation ). The recognition and measurement principles applied are in line with International Financial Reporting Standards ( IFRS ). The Legislation differs from IFRS in a number of material ways, primarily: The format of the statements is prescribed by schedules IX and X of the Legislation, The Company does not prepare a Statement of Cash Flows or equivalent and Certain disclosures required by IFRS are not included. IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. 4. Significant Accounting Policies A. Cash and time deposits Cash and short-term investments include cash balances, cash equivalents and time deposits with maturities of three months or less at the date of purchase. Interest on these balances is recorded on the accrual basis and included in Investment income. 1

11 B. Financial Assets The Insurer has the following financial assets: (i) financial assets at Fair Value Through Profit or Loss ( FVTPL ), (ii) held-to-maturity financial assets, (iii) loans and receivables and (iv) available-for-sale financial assets. Management determines the classification of financial assets at initial recognition. (i) Financial assets at FVTPL A financial asset is classified at FVTPL if it is determined to be held-for-trading or is designated as such upon initial recognition. Financial assets are designated at FVTPL if the Insurer manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Insurer s documented risk management and investment strategies. Attributable transaction costs upon initial recognition are recognised in Investment income on the Consolidated Condensed Statement of Income as incurred. FVTPL financial assets are measured at fair value, and changes therein are recognised in Investment income on the Consolidated Condensed Statement of Income. Dividends earned on equities are recorded in Investment income on the Consolidated Condensed Statement of Income. (ii) Held-to-maturity financial assets If the Insurer has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Amortisation of premiums and accretion of discounts are included in Investment income on the Consolidated Condensed Statement of Income. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Insurer from classifying investment securities as held-to-maturity for the current and the following two financial years. (iii) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost less any impairment losses. Interest income from Loans and receivables is recognised in Investment income on the Condensed Statement of Operations using the effective interest method. For the purposes of this classification, Loans and receivables are comprised of Mortgages and loans, Interest and dividends receivable and other receivables in Other assets on the Consolidated Condensed Balance Sheet. 2

12 (iv) Available-for-sale financial assets Available-for-sale financial assets are financial assets that are not classified in any of the previous categories. Certain equity securities of the Insurer are classified as available-for-sale financial assets. These equities are subsequently carried at fair value except unquoted equities, which are carried at cost. Changes in fair value other than impairment losses are recognised in Other comprehensive income and presented on the Consolidated Condensed Statement of Capital and Surplus. When an investment is derecognised, the cumulative gain or loss in Other comprehensive income is transferred to the Consolidated Condensed Statement of Income. Dividends earned on equities are recorded in Investment income on the Consolidated Condensed Statement of Income. C. Investments in mortgage loans on real estate Investments in mortgage loans on real estate are recorded initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, investments in mortgage loans on real estate are measured at amortized cost using the effective interest method, less any impairment losses. A mortgage loan is classified as non-performing when, in the opinion of management, there is reasonable doubt as to the timely collectability of the full amount of principal or interest. No interest is taken into income on non-performing mortgage loans. The allowance for losses on mortgage loans and mortgage loan interest is based on management s assessment of the amount required to meet possible future losses arising on existing mortgage loans. The adequacy of the allowances for losses is continually reviewed by management, taking into consideration matters such as current economic conditions, past experience and individual circumstances which may affect a borrower s future ability to pay. D. Segregated accounts under segregated accounts companies Segregated funds are lines of business in which the Insurer issues a contract where the benefit amount is directly linked to the fair value of the investments held in the particular segregated fund. Although the underlying assets are registered in the name of the Insurer and the segregated fund policyholder has no direct access to the specific assets, the contractual arrangements are such that the segregated fund policyholder bears the risks and rewards of the fund s investment performance. Segregated funds are carried at fair value. Fair values are determined using quoted market values or where quoted market values are not available, estimated fair values as determined by the Insurer. Segregated fund assets may not be applied against liabilities that arise from any other business of the Insurer. The investment results of the segregated funds are reflected as segregated account liabilities on line 36 (b) of the Consolidated Consolidated Condensed Balance Sheet. The Insurer derives only fee income which is included in line 15 of the Consolidated Condensed Statement of Income. Deposits to segregated funds are reported as increases in segregated fund liabilities and are not reported on the Consolidated Condensed Statement of Income. 3

13 E. Reinsurance Reinsurance premiums ceded, expense reimbursements, benefits and reserves related to reinsured business are recorded on an accrual basis. Reinsurance premiums are charged into income on a pro-rata basis over the periods covered by the contract of reinsurance to which they relate. Existing policies are reinsured for the net amount at risk less the Insurer s retention based on treaties entered into with a number of reinsurers. Generally, the maximum automatic treaty limit per insured is $35.0 million. The Insurer may periodically, on a facultative basis, place larger amounts. The net amount at risk is defined to be the death benefit minus the policy cash value. The amount of reinsurance coverage for each month is the net amount at risk at the end of such month minus the initial amount retained by the Insurer being $50,000 to $100,000 per insured for all reinsured policies issued after January 1, 2002 ($15,000 for policies issued before 2002). For policies issued in 2001 and prior years, the Insurer reinsured the variable life insurance policies for the lesser of five times the initial net amount at risk or $20.0 million. The Insurer periodically, on a facultative basis, placed larger amounts. Reinsurance contracts do not relieve the Insurer from its obligations to policyholders. Failure of reinsurers to honour their obligations could result in losses to the Insurer. The Insurer s reinsurers have a minimum AM Best Rating of A at the balance sheet date. F. Life and Annuity Policy Reserves Life and annuity policy reserves are determined by the Insurer s actuaries and represent the amounts which, together with future premiums and investment income, are required to discharge the obligations under life and annuity contracts and to pay expenses related to the administration of those contracts. These reserves are determined using generally accepted actuarial practices according to standards established by the Canadian Institute of Actuaries ( CIA ). The CIA requires the use of the Canadian Asset Liability Method ( CALM ) for the valuation of actuarial liabilities for all lines of business. The policy actuarial liability reserves under CALM are calculated by projecting asset and liability cash flows under a variety of interest rate scenarios using best-estimate assumptions, together with margins for adverse deviations with respect to other contingencies pertinent to the valuation. The policy liability reserves make provision for the expected experience scenario and for adverse deviations in experience. The Insurer bears the mortality risk related to the variable life insurance policies to the extent that death benefits exceed policyholder account values. The reserve for future policyholder benefits represents the liability, in respect of the variable life insurance policies in force as at March 31, 2017 is net of reinsurance recoverable of $209,551 (2016 payable $90,451). G. Policy Loans In January 2009, the Insurer was named with various other defendants in a class action suit filed in the United States relating to investment losses caused by Bernard L. Madoff Investment Securities LLC. 4

14 The Insurer reached an agreement in 2010 to settle this class action. The terms of the settlement, incorporated a broad package of relief including premium loans to policyholders, the assignment of certain of the Insurer s claims to a litigation trust and cooperation by the Insurer in connection with litigation of the assigned claims. In exchange, the Insurer will obtain broad releases relating to the claims in the litigation and other protections and relief. No financial settlement will be paid to policyholders. Premium loans of $325,096 were extended to policy holders as at March 31, 2017 (2016- $315,221) and are shown under Policy Loans in the Consolidated Condensed Balance Sheet. In order to continue/avoid lapsing their policies, certain policyholders sought funding from AILBL in the form of short-term premium loans for the sole purpose of keeping the policies in-force whilst those policyholders waited out the settlement process which, at that time, was estimated to be 4 years, at which point it was intended that monies would be restored to the policies and the premiums loans repaid. The term of the loans were fixed, were not backed by the/any policy collateral and repayment was not conditional on the Madoff liquidation. H. Investment in affiliates Investment in affiliates is accounted for on a cost basis. The Insurer regularly reviews the valuation of the investment in affiliate by comparing the cost against the value calculated under the equity method which approximates fair value. If equity is less than cost, impairment is recognized in the Condensed income statement equivalent to the amount of write-down from cost to equity. Amounts due from affiliates are carried at cost. The advances are non-interest bearing and have no formal terms of repayment. I. Intangible Assets Intangible assets refer to goodwill on the purchase of Tremont International Insurance Ltd. (TIIL) in 2006 as well as acquisition of an external commission stream around the same time. Intangible assets are amortised on a straight-line basis over their estimated useful lives, which is 17 years. Annually, management reviews the remaining portion of Intangible assets based upon estimates of future earnings and recognises any permanent impairment in Amortisation, depreciation and impairment on the Statement of Comprehensive Income in the year in which it is identified. J. Fair value measurement A number of the Group s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs by the Group s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. 5

15 The three levels of the fair value hierarchy are defined as follows: Level 1 Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Fair value is based on inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices such as interest rates and credit risks. Level 3 Fair value is based on valuation techniques that require one or more significant inputs that are not based on observable market inputs. These unobservable inputs reflect the Group s assumptions about market participants in pricing the assets and liabilities. When available, quoted market prices are used to determine fair value for bonds, equities and derivatives. If quoted market prices are not available, fair value is typically based upon alternative valuation techniques such as matrix pricing, net asset valuation and discounted cash flow modelling. Broker quotes are used only when external public vendor prices are not available. The Group has an established control framework with respect to the measurement of fair values. This included an investment validation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the Chief Financial Officer ( CFO ). The Group s investment validation process includes a review of price movements relative to the market. Any significant discrepancies are investigated and discussed with investment managers and a valuation specialist. The process also includes regular reviews of significant observable inputs and valuation adjustments. Significant valuation issues are reported to the Board. 5. Premium, Investment and other Commission income Premiums are recorded as revenue once they are due from policyholders and have been received. Interest income earned is recorded as it accrues, using the effective interest method. Dividend income is recognized on the date the right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Realized gains and losses on the sale of investments are reflected in income in the year they are realized. Commission and management income is included in income as earned. 6. All amounts are expressed in Bermuda dollars which is on par with United States dollars All items outlined in the Act for Schedule X, Part I sections 7 12 are not applicable for the Insurer. 6

16 Assets and liabilities measured at fair value The following table presents fair value of the Company s assets and liabilities measured at fair value in the Balance Sheet, categorized by level under the fair value hierarchy. 31 March 2017 Level 1 Level 2 Level 3 Total FV ASSETS Investments at Available-for-sale Bonds: Other (1) - 5,479-5,479 Equities: Investment in hedge funds and mutual funds - 3,576-3,576 Total of AFS - 9,055-9,055 FVTPL - Bonds Other (1) - 4,120-4,120 TOTAL ASSETS AT FAIR VALUE - 13,175-13,175 March 31, 2016 Level 1 Level 2 Level 3 Total FV ASSETS Investments at FVTPL Bonds - 3,036-3,036 Equities - 3,321-3,321 Investment in hedge funds and mutual funds - 6,889-6,889 Other (1) - 1,004-1,004 TOTAL ASSETS AT FAIR VALUE - 14,250-14,250 (1) Investment in Bond Funds 7

17 The contractual maturity profile of the insurers fixed maturity and short-term investments: March 31, 2017 Within 1 year 2-5 years 6-10 years Over 10 years Total Available-for-sale Bonds - 5, ,479 Available-for-sale Equities 3, ,576 Bonds at FVPTL - 4, ,120 3,576 9, ,175 March 31, 2016 Within 1 year 2-5 years 6-10 years Over 10 years Total Held to Maturity Bonds other (1) - - 3,036-3,036 Equities 3, ,321 Investment in hedge funds and mutual funds - 6, ,889 Other - 1, ,005 3,321 7,894 3,036-14, Significant related party transactions are as follows: 1) Operating expenses include income of $812,193 (2016 expense of $763,338) representing the Insurer s allocation of group overhead (income)/expenses. 2) Amounts due from affiliates are carried at cost. The advances have no formal repayment term and bear interest at the rate of 6.25% per annum. There is no other transaction made or any event occurring that would materially affect the financial statements. 16. Effective April 1, 2017, the Insurer was assigned and transferred all rights and obligations, title and interest in a legacy book of private placement variable life and annuity policies, with corresponding assets and liabilities of $269.0 million, from an affiliated company, pursuant to Section 25 of the Act. The portfolio transfer did not impact the Insurer s net equity position at the date of transfer, and fulfilled all terms and conditions as stated in the Amended Scheme of Transfer Order, sanctioned by the Supreme Court of Bermuda, dated March 17,

18 PART II- NOTES TO CONDENSED STATEMENT OF CAPITAL AND SURPLUS 1(a) Capital Stock Common Shares authorized: Issued and fully paid: 250,000 ( ,000) shares with a par value of $1.00 per share (b) 2(c) Contributed surplus There was a return of contributed surplus of $1 million during the year. Dividends paid and payable No dividends paid or payable in the year. (a) There was no change in authorized share capital of the insurer during the year; (b)(c) There were no shares issued or redeemed, and no options to purchase shares were contracted during the year. PART III- NOTES TO THE CONSOLIDATED CONDENSED BALANCE SHEET 1. Cash and Time Deposits - Refer to Part I Note 4A Cash and cash equivalents Short Term investments 3,097 2,549 3,408 2, All items outlined Schedule X, Part III section 2-3 are not applicable for the Insurer. 4. Refer to note in Part I Note 4H. 5. All items outlined Schedule X, Part III section 5 are not applicable for the Insurer. 6. All items outlined Schedule X, Part III section 6 are not applicable for the Insurer All items outlined Schedule X, Part III sections 7-12 are not applicable for the Insurer. 9

19 13. (a) Changes to Segregated Funds are as follows: Additions to Segregated accounts Premiums 8,891 39,862 Net increase (decrease) in market value of investments 23,468 (28,668) 32,359 11,194 Deductions from Segregated accounts Withdrawals and benefits paid 24, ,727 Operating expenses 2,519 1,940 26, ,667 Net additions (deductions) to Segregated accounts for the year 5,807 (91,473) Segregated accounts, beginning of year 250, ,538 Segregated accounts, end of year 255, ,065 (b) Following is the schedule of the Insurer s Segregated Account Cells (SAC) along with their asset and liability values. There are no SACs that have funding deficits. Segregated Account Cell Count Sum of Asset Value Sum of Liability Value 1 2,028 2, ,972 15, ,814 36, ,545 9, ,434 4, ,588 5, ,214 1, ,725 1, ,864 3, ,894 5,894 10

20 19 2,219 2, ,278 2, ,298 5, ,448 4, ,138 1, ,138 1, ,633 4, ,984 13, ,008 2, ,367 37, ,104 3, ,923 2, ,583 3, ,951 1, ,212 1, ,489 2, ,697 2, ,019 1, ,782 1, ,993 1, ,731 3, ,810 4, ,765 4, ,339 1, ,457 14, ,590 5, ,414 9,414 11

21 58 1,359 1, ,678 1, ,104 16, All items outlined Schedule X, Part III sections are not applicable for the Insurer. 22. The life policy reserves for the period ended March 31, 2017 net of reinsurance recoverable are $12,469 ( $13,229) All items outlined Schedule X, Part III sections are not applicable for the Insurer. 28. At March 31, 2017 and 2016, the balance of insurance and reinsurance payables to affiliates was $NIL All items outlined Schedule X, Part III section are not applicable for the Insurer. 32. Amounts due to affiliates are carried at cost. The advances have no formal repayment terms and are non-interest bearing. 34. All items outlined in Schedule X, Part III section 34 are not applicable for the Insurer. 36. Refer to Note All items outlined in Schedule X, Part III section 37 are not applicable for the Insurer. PART IV- NOTES TO THE STATEMENT OF INCOME 6. All items outlined in the Act for Schedule X, Part IV section 6 are equivalent to line 15 of the condensed income statement. 15. Long-term business investment income and Other Insurance income have been restated to report income from investments separately from commission income. 32. Combined Other income no other material items. 36. Realized gains/(losses) are included in Investment Income. 12