4.2 Impairment

4.2.1 Goodwill

Key assumptions made for the purpose of estimating the recoverable amount have been presented in Section 10 (for subsidiaries) and Section 13 (for the associate).

4.2.2 Financial instruments measured at cost

Impairment losses on financial assets measured at cost (equity instruments whose fair value may not be estimated reliably) are determined as the difference between the carrying amount of the assets and the present value of estimated future cash flows discounted using the current market rate of return for similar assets. In the event that the information necessary to estimate future cash flows is not available, the impairment loss may be estimated based on the value of the entity’s net assets.

4.2.3 Financial instruments measured at amortized cost

Impairment losses on assets held to maturity and loans are determined as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted using the effective interest rate determined upon initial recognition (original effective interest rate).

4.2.4 Equity instruments quoted on regulated markets as well as units in and investment certificates issued by investment funds

Impairment losses on equity instruments quoted on regulated markets, units in open-end investment funds and certificates issued by closed-end investment funds classified as held for sale are recognized if:

  • the negative difference between the present value and the cost or the amount revalued (by a previous impairment loss) represents at least 30% of the cost, or the amount revalued or
  • the market value of the asset as at the end of each of the 12 consecutive months is lower than the cost or the amount revalued (by a previous impairment loss).

Impairment losses are not recognized if it is concluded that the aforesaid events may be reversed within 6 months of the end of the reporting period or there are any other indications that the decreases may be temporary in nature.

4.2.5 Receivables from policyholders

Receivables from policyholders are reviewed in order to determine possible occurrence of impairment indicators.

If case-by-case approach was not applied (as a special write-down determined in accordance with the evaluation of the debtor’s economic and financial position), impairment is estimated on a collective basis, as a collective assessment of impairment risk for the portfolio of receivables from policyholders based on historical data regarding cash flows on receivables from policyholders.

4.2.5.1 Non-life insurance

In order to determine the amount of a collective write-down on receivables from policyholders, an estimation model is used for collective risk assessment including the total expected financial cash flows:

  • with regard to mature receivables, based on historical collectability data and
  • with regard to non-mature receivables, based on historical analysis of the share of overdue receivables combined with historical analysis of collectability, as for mature receivables.

4.2.5.2 Life insurance

The following coefficients were assumed to estimate the impairment loss on receivables:

  • for receivables from policyholders, ratios resulting from historical analysis of repayment of overdue receivables including specifics of each product based on general insurance terms;
  • for disputable receivables, ratios based on historical analysis of payments resulting from court decisions and analysis of cases when the group resigned from collection of overdue receivables.