middlesea-2023-12-31-en

Chairman’s Statement

As the reporting obligations become ever more extensive and voluminous, I feel an

obligation to be more succinct in my report to help the shareholders and any other user of the

financial statements focus on some key messages I should like to get across.

IFRS 17 - new method of reporting profits

In 2023 the financial statements have been prepared under International Financial Reporting

Standard (IFRS) 17 adopted by the local Group in line with MAPFRE Group guidelines.

Previously the accounts were under IFRS 4. The change in accounting standard has had far

reaching implications as to how assets and liabilities as well as profit is calculated and

reported. The Group has engaged local and foreign consultants to ensure adequate adaptation

to the local insurance contracts issued and reinsurance contracts held. The first year

implementation processes involved adequate monitoring to ensure the restated financial

statements being published in this Annual Report are true and fair to the best knowledge of

management and those charged with governance. It is not my intention to go into the details

as to how the changes have impacted the financial statements, but to inform you that last

year’s consolidated results after tax have been restated from €14.6 million to €5.6 million

whilst at the same time the retained earnings attributable to owners of the Company have

been increased to €59.9 million from €52.9 million.

The new method of accounting is intended to have a more consistent and transparent

treatment of insurance contract accounting across the industry.

Results

The Group registered a profit before tax of €24.0 million compared to a restated profit for

2022 of €8.3 million. With MAPFRE Middlesea p.l.c. ("MAPFRE Middlesea", "MMS" or

"Company"), which deals principally in general insurance, the profit before tax is €9.9

million compared to last year’s restated €6.6 million. The President and CEO will go into

some detail as to how we achieved this excellent result, but I would say, chiefly this is due to

a more scientific approach in assessing our risks, and pricing accordingly, as well as a better

than expected claims performance, with an overall net combined ratio of 85.6% compared to

last year’s restated 90.2%.

The Company continues to have a balanced portfolio with Motor taking up 46% of the

business, Health 17% and the remainder 37%. This remains very much in line with our target

which allows us to spread our risk base.

MAPFRE MSV Life p.l.c. ("MAPFRE MSV", "MMSV"), deals with life protection as well

as insurance-based investment products. In fact, MMSV manages the largest with-profits

investment fund on the island with approximately €1.91 billion in assets under management.

MMSV’s profit for the year was recorded at €14.6 million compared to a restated €2.5

million. The main net insurance and investment result profit drivers remain the annual

management fee derived from the assets under management (AUM) and the underwriting

performance on life protection business. In 2023, MMSV also benefited from the positive

interest rates.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Chairman’s Statement - continued

Results - continued

MMSV is continuing to make headway in pensions and unit liked products. These are a key

component in its strategic plan. Over time, these lines of business are expected to become

more material. I am pleased to say that we have a leadership position in the pensions market.

This market is still in its infancy but expected to continue growing over the next years. The

growth and development of pensions will also continue to depend on the Government’s

policy and fiscal incentives being provided. We continue to urge government to provide

incentives to encourage individuals to take up pension schemes which will provide a secure

and adequate income for them later in life.

The With Profits investment fund has generally provided policyholders’ with stable and

satisfactory returns when compared with other similar investment products while having the

peace of mind that the capital is guaranteed at policy maturity or earlier in case of death.

Whilst I reported last year that the unusual concurrent fall in prices in equity markets and

bonds led to a negative return on investments of 13.1%, this year we were able to achieve a

very strong return of 8.64%. This allowed us to declare a 2.0% - 2.5% return to policyholders

compared to the 0.9% – 1.0% we declared last year. It should be noted that the bonus is tax

free and therefore represents an even more attractive return in these uncertain times where the

markets have remained volatile, and where the policyholder‘s capital remains guaranteed at

maturity.

Solvency

It has been recognised that a key indicator as to an insurance company’s health is its level of

solvency. Both MAPFRE Middlesea and MAPFRE MSV Life retain high solvency ratios,

with both expected to be higher than the 2022 ratio of 232.1% for the former and 161.6% for

the Life company. The board of directors, through the relevant Risk and Compliance

Committees reviews solvency on an ongoing basis, whilst maintaining a prudent risk

appetite. Recent volatility in the markets, partly due to geopolitical events have made the

Group's prudence an imperative and contributed to its strong solvency ratio.

Dividends

MAPFRE Middlesea is declaring a net dividend of €4.5 million (2022 €3.5 million). This

translates into a net dividend per share of €0.048913.

Last year we did not receive a dividend from MAPFRE MSV Life in order to maintain our

strong solvency ratios in the face of volatile markets and the poor performance of the fund

which is backed by a capital guarantee for the investors. I am pleased to report that in 2024

we will be receiving a net dividend of €1.0 million which we expect to be in a position to

distribute to our shareholders next year.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Chairman’s Statement - continued

Regulation

The welter of legislation and regulation continues to bear down on the industry. We have

been concentrating on the implementation of IFRS 17, which came into force this year and

under which regime the accounts are prepared. This has been a costly and complex exercise

which has taxed the accounting and actuarial departments heavily. We have had to bring in

consultants, and also use group expertise, a MAPFRE resource we are able to tap into. I am

grateful to our staff involved for the effort they have put in successfully implementing this

new accounting standard. It truly was a herculean effort.

Unfortunately, there does not seem to be any let up in new regulations set to come in over the

next few years. We have ESG (Environmental, Social and Governance) reporting coming in

2025, DORA (Digital Operational Resilience) regulations and others which will continue to

take up resources and effort, and of course add costs to our operation.

Whilst I can understand the need for these regulations and new reporting requirements, we do

need time to settle down having come through an unprecedented period of new laws and

regulations which we have had to implement.

Operational Developments

Whist I shall leave it to the President and CEO to detail the operational developments for the

year, I have had occasion to mention the IT developments which have taken an inordinately

long time to be implemented at MAPFRE Middlesea and at immense cost. Whilst we are

slightly behind target, we should soon have the majority of our operations fully integrated on

the new system. This has been largely rolled out to our Tied Insurance Intermediaries and

most of our Agents. The benefits of this system will start being felt in 2024.

The Life company have also transformed their IT system, migrating to a new platform which

is now virtually complete. The welter of new regulation as well as the IT transformation have

taken up huge resources and effort, as well as of course cost. In the meantime, we need to

continue with our main business of managing our customers risks, expanding our market, and

looking after our shareholders. These reforms continue apace as they do in any organisation,

and as can be seen from the results, have had the desired effect.

Corporate Social Responsibility

Our values and commitment drive us to actively contribute to the communities we operate in.

Our Group's ultimate mission is to create shared value with society, working towards a better

world for everyone.

As part of our social commitment, Fundación MAPFRE continued supporting organizations

in Malta, focusing on training for the youth and playing a vital role in road safety.

Fundación MAPFRE's Logging Off campaign raises awareness about internet addiction

among school children, offering live workshops for a healthy online interaction experience.

In 2023, Fundación MAPFRE also extended its support to Caritas Malta and Jesuit Refugee

Service Malta (JRS).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

iii

Chairman’s Statement - continued

Corporate Social Responsibility - continued

Our MAPFRE Malta volunteers actively participated in various activities, extending a

helping hand to those in need and contributing to environmental conservation, organizing

activities such as food and blood donations, and contributing to various charitable

organisations and NGOs.

MAPFRE is a dedicated company, mindful of its social impact, fostering economic and social

development in the countries it operates in. We believe in a business approach that includes a

rigorous commitment to social, environmental, and governance responsibilities for the well-

being of future generations.

Distribution

Mapfre Middlesea business model is somewhat different from our competitors, we rely on 6

agents, over 60 Tied Insurance Intermediaries and Brokers to bring in the bulk of our

insurance premium. Only 9.4% of our business is written directly by us. We depend on these

sources of business and do our best to provide the support, professional guidance as well as

competitive and relevant products required by the market. Our agents and Tied Insurance

Intermediaries have responded magnificently and have contributed to the successful results

we have achieved.

I would like to place the great thanks of the board and staff of the Company to our

distributers for their loyalty, professionalism and dedication to their work.

With MAPFRE MSV Life, Bank of Valletta remains by far the single largest producer for the

company, both in terms of term assurance as well as investment products. The bank has

proved to be an excellent partner, as well as shareholder in the group. I cannot emphasise the

importance of the bank to the Malta group, which has in no small way contributed to the

results reported here. This is a partnership which has stood the test of time and has delivered

results for customers and shareholders alike.

Directors and shareholders

MAPFRE Middlesea p.l.c. is a listed entity regulated by the Malta Financial Services

Authority. It is a subsidiary of MAPFRE Internacional. Being part of one of the largest

insurance companies in the world allows us to access technical knowhow and expertise which

is at the cutting edge of the industry. It has allowed us to develop the business to the latest

standards by providing relevant support in all sectors. MAPFRE Internacional has a

shareholding of 55.83% in the Company.

Bank of Valletta p.l.c. is the other major corporate shareholder with 31.08% of the

shareholding and is a 50% co-shareholder in MAPFRE MSV Life p.l.c.. The bank has proved

to be a steady partner throughout the years, providing not only input and insight at board

level but is the main generator of turnover in MMSV. The commercial relationship between

the Bank and MMSV remains very strong and is critical to its evolution. 13.09% of the

shareholding in MAPFRE Middlesea is held by the so-called smaller shareholders, of which

we have some 3,700.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Chairman’s Statement - continued

Directors and shareholders - continued

I have the privilege to work with a dedicated board of professionals who have provided

direction and support to the Company’s executives. Jose Luis Jimenes, Jose del Pozo, Etienne

Sciberras, and Jose Ramon Alegre represent MAPFRE. I should particularly like to thank

Jose Ramon Alegre who retired from the board last month to take up new responsibilities in

the group elsewhere. I particularly appreciated his energy and erudite advice which he

brought to the board. I welcome Eduardo Perez de Lema, CEO International Insurance at

MAPFRE S.A. who has been appointed to replace Jose Ramon Alegre. His appointment is

still pending regulatory approval. Gordon Cordina, who is the chair at Bank of Valletta, and

Godfrey Swain were appointed by Bank of Valletta. The smaller shareholders elected

Antoinette Caruana and Paul Testaferrata Moroni Viani. I can only record my sincere thanks

for the highest level of professional input given by the directors at the board.

Javier Moreno at MAPFRE Middlesea and Etienne Sciberras at MAPFRE MSV Life remain

the Chief Executive Officers tasked with running those companies. They are supported by

dedicated staff who work in an increasingly technical and regulated environment. On behalf

of the Board I thank them for their hard work and dedication, and for their achievements in

the year under review.

Signed by Martin Galea (Chairman) on the 25 March 2024

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

President & Chief Executive Officer’s Statement

MAPFRE Middlesea Group highlights

This is the third year running that I am writing this report on behalf of MAPFRE Malta

management, and I must say that regrettably most of the situations described for the year

2022 still remain in 2023.

The uncertainty caused by global political instability has not only diminished but on the

contrary due to the recent conflict between Palestine and Israel has become even more

complex. We are certainly living in turbulent times that make us consistently on the verge of

suffering a very relevant deterioration in global stability. Fortunately, these conflicts are still

under some level of control although the risk remains.

Because of this situation, global financial markets have become volatile and interest rates

remain on the high side to contain inflation which also remains high although it has

moderated when compared with the view in 2022.

In Malta we have seen how fundamentally it is inflation that is the main problem we have to

deal with, as we are primarily importers of goods and services from abroad.

Fortunately, the pandemic has become just another seasonal illness, which although it

impacts on our health portfolio, it does not limit the normal performance of our activity.

Due to this uncertain and changing environment, once again our focus as MAPFRE Malta has

been on how to improve our relationship with clients, strategic partners, intermediaries,

providers and other stakeholders in order to continue being the leading insurance group in

Malta, highlighting our wide range of products and service quality as our hallmark.

In this sense, we have continued to implement our strategy, facing challenges and developing

very specific projects that allow us to continue making a difference when compared with our

competitors. This strategy must always be adjusted to the reality of each moment and

therefore we have activated specific plans that have allowed us to mitigate the adverse effects

caused by the complex international environment. The results for the 2023 financial year

confirm that the decisions and measures taken have been appropriate to guarantee sustainable

development over time, while generating profitability and value creation for our shareholders.

Once again, it is important to mention that the contribution of our team has been key to the

excellent results achieved. It continues to be one of our priorities to take care of all our

employees and develop the talent that makes us better.

Going into an assessment of our results, I must emphasize that we have been able to obtain

magnificent results in circumstances which were not easy, consolidating our leadership not

only in Non-Life, where we have positively developed all lines of business, but also in Life,

promoting an important transformation in our offer of savings and investment solutions.

First of all, I would like to point out that the commercial activity in both companies has been

very remarkable, the positive evolution of the Maltese economy has certainly helped us, but

good sales figures cannot be achieved if there is no clear commercial vocation. We have

launched different campaigns and products to promote a good commercial dynamic.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

President & Chief Executive Officer’s Statement - continued

MAPFRE Middlesea Group highlights - continued

Although it may come as a shock with my comment in the previous paragraph, our total

turnover as MAPFRE Malta has been reduced compared to 2022, but it is appropriate to

explain this situation in more detail and we do so later in this report. However, I should stress

that this performance is in response to the approach taken by the Group in Malta and also

reflects a financial market situation which has primarily affected one of our investment

products.

The total business written has been €297.0 million (2022: €342.0 million), with a different

evolution if we consider the different classes. In the case of general insurance, our

performance has been excellent, as we have achieved a growth in premiums in all lines of

business, thus maintaining a balance that allows us to give our clients a good offer and at the

same time diversifying the activity.

Regarding the life business, we should mention that the total volume reached €201.3 million,

representing a decrease compared to the €254.9 million in 2022 but with a greater

diversification, focusing on developing more regular premiums, pensions, protection and

capital light solutions (Unit linked) in contrast with our classic With Profits, a product that

continues to be very important in our strategy.

Regarding the Group's result in Malta, we are very proud to share an excellent performance,

which has led us to obtain a consolidated pre-tax result of €24.0 million, a figure that

improves on the already good result we obtained in 2022 which has now been restated to €8.3

million under IFRS17. There are many reasons that have led us to obtain this figure. More

details for each company will be provided later in this report.

The Premium written figure for MAPFRE Middlesea p.l.c. (“MAPFRE Middlesea”, “MMS”,

“Company”) including group life reached a total of €95.7 million at the end of 2023,

generating an increase of 9.9% over 2022, undoubtedly a relevant growth in another

uncertain year. The result was also very positive and remarkable, with a profit before tax of

€9.9 million, clearly better than the restated €6.6 million obtained in 2022.

Insurance service results remained resilient, with a Net Combined Ratio for non-life business

of 85.6%, with a clear improvement over the restated 90.2% ratio obtained in 2022. The

diversification of our business helps in obtaining a good technical performance, it is good to

highlight that the motor business has improved notably this year when compared to the

previous two years.

Regarding the long-term business, volatility remained in 2023, with very challenging

international and local financial markets, creating a strong competition for our savings

products. These are disclosed in a specific section within this report.

On balance, this year has been very positive in terms of results for both companies, and

adequate in terms of the growth of the business lines that contribute most to the future

sustainability of the group in Malta and consistent with our strategy of sustainable and

profitable development.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

vii

President & Chief Executive Officer’s Statement - continued

MAPFRE Middlesea Group highlights - continued

We have once again experienced challenging circumstances and we need to start considering

this as the new normality. But our resilience and determination in our capabilities have led us

to navigate properly in these choppy waters, providing an excellent performance.

As we said in 2022, we reassert our commitment to strong sustainable development and value

creation for our shareholders.

It is important to note that despite the difficult labour market, once again we have managed to

maintain great stability in our management teams, as well as in our governing bodies. We

have been able to reinforce certain key areas. Undoubtedly, a critical asset for the

achievement of our objectives.

Finally, we must mention the immense work involved in the adoption of the new IFRS 17

Insurance contracts reporting standard, which replaces the previous IFRS 4 Insurance

contracts.

The challenge has been immense given the complexity of the change and it is important to

recognize the effort made by the MAPFRE Malta organisation, but we must expressly thank

the Finance and Actuarial teams for their great performance in such stressful circumstances.

General Business

Premiums in 2023 reached €93.0 million, representing an increase of 10.1% over 2022.

This year we are particularly proud to have had a significant increase in premiums in all lines

of business, accelerating the growth we already had in 2022.

In our comparison with the rest of the market, we still maintain a clear leadership position

with a market share of 31.9% in 2023, which is a slight drop from the 32.6% we had in 2022.

We maintain proportionate leadership in most business lines.

Within the different business lines, we should particularly highlight the growth of the

personal lines with the health business leading the way. Motor has also shown a positive

evolution, with the increase in premium rate contributing favourably.

Commercial lines have also been very solid throughout the year, with all classes growing in

premiums over 2022.

With just over 125,000 customers and more than 260,000 policies, we remain the major

player in the market. These figures are undoubtedly very important for MAPFRE as they

show that we continue to have the support and trust of our clients. Having said that, it is true

that we have decreased the total number of clients when compared with previous year mainly

coming from a small reduction on the motor portfolio, so we are fully determined to recover a

positive growth of clients for 2024.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

viii

President & Chief Executive Officer’s Statement - continued

General Business - continued

Commercial activity has been intense and 65,820 new policies have been issued, a significant

figure that has been possible thanks to our large distribution network and the attractive value

proposition that the Company offers to its clients.

Our policy retention ratio is 78% and our client retention ratio, above 87%, remain in a high

standard in general terms although not enough for us as we see some clients leaving the

Company. Our ambition and business culture must drive us to consistently keep our

customers satisfied, loyal and open to placing greater trust in us with more insurance

products.

Regarding our product offering, MMS has continued working in developing interesting

special offers for our clients. We reiterate MMS has the widest coverage of insurance

solutions that allow our intermediaries and sales force to meet the needs of each family,

company or organisation.

On distribution, this year we have considered to adjust the commercial setup for MAPFRE

Malta, looking for a better specialisation across the different distribution channels, with the

aim of gaining efficiency and focus on each one. In fact, we have improved the level of

interaction with all our intermediaries, acting with all of them in a very proactive approach to

better fit client’s needs.

Our partners, Brokers, Agents and TIIs have demonstrated once again that a relationship

based on mutual trust and commitment is the basis for excellent service to our clients,

offering agile and personalised attention.

On top of this, as part of our value proposition, clients who bundle their insurance

requirements with MMS will not only get a cost saving but also enjoy additional benefits and

services. In this regard we have been working strongly on a new value proposition for motor

insurance.

Our agents had an excellent year, showing that this model generates profitable and

sustainable growth. They have increased premium by 15.5%, a remarkable figure, and a

significant contribution to the diversification that is always part of our strategy. It is worth

mentioning the formidable performance achieved by Laferla Insurance Agency.

MMS continues to maintain an excellent professional relationship with brokers and the strong

figures show this year has been a good one. Considering Commercial lines, reinsurance

restrictions and higher costs are generating more complexity as this type of business requires

more protection capacity to meet concrete customer´s needs.

Our direct business, consisting of our regional offices and TIIs, has also performed very

positively. As a Company, we want to continue to promote this channel further as we still see

more potential. MMS continues to develop this channel and during 2023 we have been

simplifying the current model to gain efficiency and working with the right plans for

delivering higher sales figures in the coming years.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

President & Chief Executive Officer’s Statement - continued

General Business - continued

Motor business evolution this year was much better than in 2022. There are several factors

impacting favorably, mainly a combination of an increase on the average premium, revised

underwriting guidelines, reduction in the frequency of claims, moderated increase on claim

costs and a lower number of large losses. In addition, the good work on the run-off gave us a

better technical performance.

As a result of all this, the net Combined Ratio (COR) reached 90.2%, far better than the one

achieved in 2022 of 99.5%.

The successful motor plan executed during the year will still be in action and its development

will be monitored closely in 2024. Further analytical capabilities have been improved during

this year together with improved skills from the team.

Health business performed very well with net COR holding at a very positive 87.6%, higher

than last year but still very profitable. We saw a growth in both individual and group lines.

The rest of the business lines had a net COR of 72.2%, again a clear improvement over 2022

(79.4%), in the main delivered by a an improved General Liability net combined ratio which

in 2022 was impacted by various large losses partly offset by a deteriorating loss ratio from

Marine Hull due to a current year large loss.

With Motor business amounting to 47.9% of the non-life portfolio, the diversification of

businesses ensures greater stability in our technical performance.

Control of management expenses, inflation costs and additional projects impacted negatively

the evolution of costs. Principal drivers on this come from staff costs and IT projects and also

non-technical costs as a result of IFRS17 Insurance contracts project.

With a headcount at the end of 2023 of 184 employees, MMS has suffered a variation of

4.0%, with a turnover of 11.9%. This is a very good outcome when compared to the market

for financial institutions to which the turnover rate is around 20%. The commitment to our

employees and society remains unchanged and embedded in our corporate culture and this is

a strategic pillar for the coming years as we face a difficult labour market, with very low

levels of unemployment, rising wage pressure and high mobility in the market. We have

initiated a very ambitious program on transformational leadership that will continue in 2024.

We are preparing our teams to accelerate the transformation of the Company.

The solvency of MMS as provisionally determined by Management, continues to be very

high, and although expected to be better than that for 2022 will remain more than double the

minimum legal requirement. On top of this, the reinsurance protection offered to the

Company by MAPFRE Re, the MAPFRE Group reinsurance company, ensures an adequate

cover for significant losses that guarantees that our Solvency is not negatively impacted by

such occurrences. Taking advantage of the MAPFRE Group purchasing power makes sure

that such cover is obtained at an optimal cost for the Company, especially when the

reinsurance market hardens due to big losses happening worldwide.

This year we have completely reviewed our reinsurance program to be sure we are well

protected against catastrophic risks.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

President & Chief Executive Officer’s Statement - continued

General Business - continued

Investment return behaved completely opposite to 2022, at a very positive €2.0 million,

provided by an excellent performance on all asset classes. The valuation of our main real

estate investment, Development House, showed a negligible change.

Long Term Business

MMSV offers a wide range of protection, savings, investments and retirement solutions

addressing the diverse needs of individual clients, companies as well as other organisations.

2023 presented a challenging economic and financial landscape. The first half witnessed the

US regional banking crisis and the subsequent takeover of Credit Suisse by UBS.

Geopolitical anxieties remained elevated due to the ongoing war in Ukraine and the eruption

of the Hamas-Israel conflict. Despite these headwinds, the global economy, particularly the

US, demonstrated remarkable resilience. Growing confidence in central banks’ ability to curb

inflation, fuelled expectations of interest rate cuts in 2024, spurred a recovery in equity

markets. Notably, benchmark yields closed the year near their previous year-end levels,

underscoring the market’s cautious optimism.

Total business written for financial year 2023 totaled €201.3 million, a decrease of 21.0%

over the prior year €254.9 million, driven mainly by a lower, albeit, expected demand from

single premium With-Profits business. This was mainly the result of a lower re-investment

rate on maturing policies as increased competition from bank deposits persisted.

On the other hand, the prevailing interest rate scenario was an opportunity to accelerate

MMSV’s product diversification strategy with the launch of short-term Unit Linked

campaign products. These proved to be extremely popular with the retail investors looking

for short-term guaranteed income and capital products. Regular premium business results

were also satisfactorily. The resiliency of the local economy was reflected across several

economic sectors particularly in terms of a heightened activity in the property market leading

to a robust demand in mortgage loans, which loans, are positively correlated with the demand

in life insurance protection. Long-term regular savings, primarily retirement savings

continued to exhibit a sustained demand through personal pension plans and also, but to a

lesser degree through voluntary occupational pensions schemes.

The With-Profits funds under management increased to €1,910 million from €1,895 million

in 2022, mainly driven by positive investment gains of €165.84 million, representing a

positive net investment return of 8.64%.

Operating expenses were 5.4% below 2022. This was mainly due to the lower acquisition

expenses from new business which compensated for the increase in internal expenses.

MAPFRE MSV Life registered a profit before tax of €14.6 million for the year ended 31

December 2023, compared to a restated €2.5 million registered for the previous year. Profit

after tax is at €9.6 million, compared to a €2.1 million restated for the previous year.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

President & Chief Executive Officer’s Statement - continued

Long Term Business - continued

On the 1st January 2023, MMSV adopted IFRS 17 Insurance contracts and IFRS 9 Financial

instruments. These new accounting standards, particularly IFRS 17 is of significant

relevance. While the standard does not change the economic reality nor the underlying

profitability of the Company, it does represent a material change in terms of accounting

recognition, measurement, and disclosures.

The adoption of IFRS 17 necessitated the restatement of the 2022 comparative figures. The

restated 2022 comparative figures have to be read in the context of a Day 1 transitional gain

reported directly into the Retained Earnings on the statement of financial position, the impact

of interest rates hedging on the term book, and the timing differences in the accounting profit

recognition, which gave rise to different accounting results when measured under IFRS 17

rules as opposed to IFRS 4.

The financial performance in 2023 was characterized by a positive technical and non-

technical contribution towards the reported results. While the technical performance

benefited, amongst other things, from the recovery of asset prices and favourable

underwriting performance, the higher market yields served as a tailwind to the non-technical

results.

Total shareholders’ funds at the close of 2023 amounted to €165.4 million (2022 restated:

€155.8 million), an increase of 6.1% over the previous year and well ahead of minimum

solvency guidelines.

The end of year Solvency Capital Requirement ratio is expected to improve compared to the

corresponding 2022 figure. Through its risk management framework, the company actively

manages its insurance, market and operational risks to preserve its financial stability and

maintain its solvency ratio within its defined risk tolerance.

Consolidated Results

In 2023, the Group registered a profit before tax of €24.0 million, 189.6% higher compared to

the restated previous year result under IFRS17. After tax, the Group generated a profit of

€15.8 million or 181.4% higher than the restated previous year results. The tax expense of

2023 is less than the 35% corporate rates closing at 34.2% compared to 32.3% in the previous

year due to a lower impact of Property losses that are taxed at 10%. Earnings per share

attributable to shareholders have increased to 12c1. The profit attributable to shareholders

increased from a better net insurance and investment result from both MMS and MMSV.

MMS is committed to returning value to its shareholders and will continue to dedicate an

important part of its profit to remunerate the shareholder.

Whilst still maintaining a prudent policy in line with discussions with our regulator, MMS

will propose to the board of directors to pay a net dividend of €0.048913 per share. The

Company's payout will be 68.7% of this year’s profit after tax of the Company.

In parallel, we continue to increase the value through both companies’ capitalisation to

manage stressed scenarios as we still face complex years with significant levels of

uncertainty.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

xii

President & Chief Executive Officer’s Statement - continued

Statement of Financial Position

The group's total assets increased by 1.8% and totalled €2.41 billion. More than 95.7% of

them are return-seeking assets (investments and cash and cash equivalents) mostly within

MMSV’s funds under management that regained from the sharp drop suffered in 2022.

These funds are invested in diversified securities (local and foreign) and are managed in-

house or externally by highly reputable entities. The Group also has a portfolio of rented

property investments and property-related shares.

On the liabilities side, 98.2% of the balance pertains to Insurance, investment and reinsurance

contracts liabilities. MMSV’s Insurance contract liabilities marginally increased as

investment values rallied back but reinvestment rates were subdued. On the other hand,

investment contract liabilities increased significantly following the issue of unit linked

products during the year. MMS’s insurance contracts liabilities registered a drop of 12.7%

with an increase in the liabilities for remaining coverage, reflecting the higher premium

written, and a drop in the liability for incurred claims following the settlement or release of

large loss reserves.

Total equity increased by €12.5 million or 7.9% including the minority with the profit for the

year partly mitigated by the dividends paid.

Review of operations

2023 has also been an important year from an operations point of view.

Following the strategy defined by MAPFRE Malta, we have worked intensively in different

areas.

The first task was the organisation of the teams that manage operations in both companies,

both in MMS and MMSV.

In the first case, some of the most relevant changes and achievements are listed below:

• Reorganisation of the operations team and better utilisation of existing heads, creation

of Quality and Control area to focus on quality of service and control of claims

operations;

• Health: gained operational efficiency and very improved speed of settlement;

• Motor: better information to our clients, improved inhouse surveys, sms touchpoints

for spare parts;

• Processes: total revision of Contact Centre services with Middle Sea Assist, Robotic

Process Automation;

• Quality and Control: better dashboards and introduction of transactional Net Promoter

Score with the customer at the centre of our activity;

• Policy operations unit: absorbing the administration task from commercial;

• New App for claims.

Regarding MMSV, it is important to mention the creation of the Customer Experience

department, part of the operations area, whose mission is to optimize customer service in the

Life business through a one stop shop concept.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

xiii

President & Chief Executive Officer’s Statement - continued

Review of operations - continued

During 2023, MAPFRE Malta has continued to drive forward its omni channel approach,

introducing improvements across the board. At MAPFRE, we want to accompany clients and

engage with them based on their preferences. This is a reality as we provide attention and

services through our website, contact center, direct offices, TIIs, agents and brokers.

Our integrated website, www.mapfre.com.mt, provides the customer with a global vision of

the products and services that our Group offers in both Life and Non-Life, undoubtedly the

widest insurance offer in the country. We continue to promote direct services to

policyholders to make regular processes, such as quotations, renewals, electronic payments,

and notification of claims, easier and simpler. An additional level of functionalities from our

client portal, https://myinsurance.middlesea.com/, will be deployed during 2024.

We cannot forget our loyalty program, Insure&Save (https://www.mapfre.com.mt/insure-

and-save/), created solely for the benefit of our clients, definitively delivers additional value

for money when one decides to be part of the MAPFRE community. We have enhanced the

program by constantly adding new partners to ensure that our customers are provided with a

greater choice.

The MAPFRE Contact Centre performed through our associate company MAPFRE

Middlesea Assist Limited, has been already fully digitalized and it´s our flagship service on

behalf of the customers to deliver all kind of services related to their policies, as the roadside

assistance or the home assistance.

The experience of our customers is always key for us, that is why we have turned to our Net

Promoter Score (NPS) survey where, despite the good results obtained, we have analyzed

those points that obtained a lower score in order to implement specific action plans to

improve. This year we have started to also evaluate different specific transactions with our

clients and consider exactly what they want us to deliver in order to increase their satisfaction

level.

Furthermore, during 2023, with reference to digital transformation we made significant

progress in completing the complex process of transforming our IT systems.

Our employees and intermediaries are now operating with the new systems for the vast

majority of both companies' operations. We continue to build new functionalities that make

up MAPFRE Malta's new technological ecosystem, a 360º approach that integrates all

processes, seeking a permanent level of automation and the generation of operational

synergies.

We must also highlight the development of greater operational efficiencies, which is why

more operational processes have been optimized this year with an additional two Robotic

Process Automation technology in the pipeline.

Last but not least, in 2023 we continued executing organisational adjustments recruiting new

employees with special skills to strengthen the technical functions and those that are shared

between MMS and MMSV. We firmly believe in Talent Development as one of the main

assets for the future of our organisation and have therefore reinforced positions in different

key areas of MAPFRE Malta.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

xiv

President & Chief Executive Officer’s Statement - continued

Subsidiaries and Associates

BEE Insurance Management Limited and Euromed Risk Solutions Ltd

BEE Insurance Management Limited (“BEE”) and Euromed Risk Solutions Limited, our

subsidiaries dedicated to the provision of insurance services to third-party companies, have

managed to maintain business with their existing clients, with a good progress in terms of

new clients.

Apart from third-party business, BEE also provides IT services to the MAPFRE Malta Group

insurance companies, gaining more competences as a unique qualified team.

During 2023 we have discussed the strategy we need to develop for the third-party business

and we already have a plan in execution for 2024.

Middlesea Assist Limited

MAPFRE Middlesea Assist Ltd, our joint venture between MMS and MAPFRE Asistencia,

generated a profit after tax of €0.22 million, an increase of 14.9% compared to 2022.

Its principal role is to be MAPFRE Malta's arm in developing services for our clients. As a

leader in roadside and home assistance services, it is perfectly aligned with our service ethos:

we prefer to solve our clients' problems rather than pursue a compensation process.

Definitively, MSA is our best strategic partner for fostering services on behalf of our clients.

The evaluation of these services has been highly rated by our customers, in fact our Roadside

Assistance service is the best in its class in Malta.

As mentioned earlier, we are optimizing the Contact Centre services within our insurance

companies to enhance the final client experience and take it to the next level.

When people come first

We stand by you, supporting your journey towards progress and contributing to the creation

of a more sustainable and compassionate society. Our focus is on what matters to you.

Our purpose is to give our best every day, always close to our clients, ready to provide

support for their current needs and future challenges. In an uncertain world, our strength lies

in the capabilities of our employees, collaborators, and suppliers to deliver excellent service,

innovate, adapt to customer needs, and be there when they need us.

Trust is the foundation of our relationships with customers and stakeholders. At MAPFRE,

we aim to instil confidence, providing security, strength, and the ability to achieve goals. We

are dedicated to offering peace of mind, leveraging our knowledge, experience, innovation,

and capacity to help clients move forward and enjoy life to the fullest.

Our approach is unique; our values and commitment manifest in a continuous effort to

contribute to the development of the communities where we operate. The core mission of our

Company is to generate shared value with society, working towards long-term improvements

for society as a whole. Our commitment to a more sustainable and compassionate world is

intrinsic to our business activity.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

President & Chief Executive Officer’s Statement - continued

When people come first - continued

Through Fundación MAPFRE activities, we actively engage in social responsibility. We

support various organisations in Malta, focusing on aiding those in need. Key priorities

include providing training for the younger generation and playing a significant role in road

safety for all road users. Noteworthy initiatives include the Street Smart campaigns in schools

and the Logging Off campaign, addressing internet addiction among school children.

In 2023, Fundación MAPFRE also continued its support to individuals in need, and this time

the beneficiaries were Caritas Malta and JRS Foundation.

MAPFRE Malta collaborates with diverse entities, organizing activities such as food and

blood donations, environmental initiatives, and donations to charitable organisations and

NGOs. Our commitment extends to fostering economic and social development in the

countries where we operate, recognizing that business development requires a comprehensive

social, environmental, and governance commitment for the benefit of future generations.

ESG is high on everyone’s agenda. It is a framework that facilitates the understanding of how

an organisation is managing risks related thereto. Good practice from an ESG point of view,

contributes to overall sustainability. At MAPFRE Malta this is already embedded in our

strategy through a specific sustainability plan. Our plan envisages specific action on each of

environmental, social and governance matters. We are not starting from scratch; these

activities were already part of the corporate DNA of the Group and were already present in

our daily business.

The plan goes hand in hand with our business strategy in a fully integrated manner, especially

in the development of products and services, and it determines the responsible management

of our assets and investments.

The continued presence of significant inequality gaps in society requires us to broaden our

perspective, to continue advancing towards a better model that guarantees equal opportunities

to all, without exclusion. Through this vision, we are working to make quality employment,

inclusion, financial education, and the sustainability of our value chain the drivers of

transformation.

We are pursuing the implementation of MAPFRE's ambition and commitment to the

decarbonisation of the economy, as well as helping our clients and providers to transition to

more sustainable practices.

We are aligned with MAPFRE Group’s sustainability plans such as 100% carbon neutral by

2030, policies which ensure people with disabilities make up at least 3.5% of the workforce,

eliminating the gender pay gap, working towards provider sustainability through agreed

transformation plans, and refraining from investing in, or insuring, fossil fuel risks that do not

have an energy transition plan in place.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

xvi

President & Chief Executive Officer’s Statement - continued

When people come first - continued

We regularly review ESG requirements based on what is expected of us, and on what we

believe ourselves to be capable of achieving. At MAPFRE Malta, we are working towards

aligning our services and products with these aims. We achieve this through transitioning

gradually towards improved sustainability in our products and investments as well as our

underwriting. In 2022, MAPFRE Middlesea launched the first electric vehicle insurance

policy on the island and MAPFRE MSV Life was the first company to launch ESG funds

linked to its investment portfolio.

In July 2022 we joined MESGA, the Malta ESG Alliance, to become an active player in

conjunction with other leading companies in the country, fostering initiatives driven by the

private sector that should accelerate the sustainability of Malta.

MAPFRE remains fully committed to the 2030 Agenda. We know that the response to global

challenges can only be collective. The opportunity for transformation that lies before us, and

the vision of what we want to achieve, inspire us to be ambitious. One of the main excuses

for doing nothing is the belief that individual actions do not bring about change. We are

convinced that change is possible, and we want to be part of it.

Looking forward

2023 has once again been a very challenging year, although MAPFRE Malta has managed to

cope with all these changes in a way that has generated a positive return for our clients and

also for our stakeholders and shareholders.

When we defined the strategy for 2022-2024 we did not imagine that the economic

uncertainty and instability would be even greater than that experienced in the times of Covid.

We have completed two of the three years of this strategic cycle, and we are satisfied with the

progress made, although we are still working hard to finish 2024 with our main challenges

and projects duly executed. It has not been an easy road because the scenario is so changing

and uncertain that certain decisions must be taken with prudence and sufficient room for

manoeuvre.

Our ambition for this period still remains strong and we want to continue to be the referred to

insurance group in Malta, both in Life and Non-Life. Our change agenda is based on

sustainable, balanced and profitable growth; on the continuous improvement of internal

efficiency; and further accelerating the transformation already underway.

We continued moving forward in our three major areas in our new strategy based on the

Group Pillars:

Customer focus. We will continue to create new products and solutions adapted to both

families and corporate clients.

We will insist on promoting a differential value proposition where insurance is only a part of

what we offer. We want to reinforce our customer experience.

Our newly created Client Area, a shared function for MMS and MMSV, has the ultimate goal

of understanding and satisfying the different needs of families and companies, both for Life

and Non-Life.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

xvii

President & Chief Executive Officer’s Statement - continued

Looking forward - continued

Distribution and diversification. We remain committed to a multi-channel distribution

model, adapted to the needs of our customers and we must continue to strengthen the direct

relationship with our customers when they require it, either in person or digitally. We shall

continue to offer the widest range of insurance products, diversifying towards those insurance

solutions that best suit our customers and which are also aligned from a technical and capital

management point of view.

Gaining efficiency. We are optimizing and simplifying processes. Agility has become an

essential objective. Our technological transformation will allow us to do things faster and

more directly, adjusting operating costs that will enable us to compete better.

The regulatory environment will continue to be very intense in the coming years and as

MAPFRE Malta we welcome all these changes. We will maintain the same fluid, transparent

and cooperative relationship with the different bodies that regulate our activity, mainly the

Malta Financial Services Authority. We always aim to strike the balance between proper

control and business development on behalf of our intermediaries, providers and other

stakeholders. We must all cooperate to achieve full regulatory compliance without affecting

commercial and competitive activity.

Any business strategy requires a favorable and predictable environment to be successful and

we must defend Malta's excellent prospects. We must also find solutions to the growing

shortage of qualified professionals in a market of full employment.

Road safety. In 2023 there were some positive movements, but we cannot let our guard

down. As an insurance Group, we reiterate our total commitment to collaborating with other

institutions in the promotion of road safety. We do it with Fundación MAPFRE. As a society,

we cannot accept that serious avoidable accidents continue to occur. We must raise

awareness of the risks of alcohol and drug consumption, the use of mobile phones and

inappropriate speed. We must act holistically in all relevant areas as education, legislation,

scoring of irresponsible drivers, ensuring compliance with the law, improving infrastructures

and black points and vehicle fleets to rise to the challenge of Zero Fatalities on the roads. All

the stakeholders need to act in a coordinated manner to change this situation and MAPFRE

will be there.

At MAPFRE, we are an insurance Group committed to our shareholders, customers,

distributors, employees and Maltese society and we will continue to work hard every day to

be Your Trustworthy Company.

Signed by Javier Moreno Gonzalez (President & CEO) on 25 March 2024

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

xviii

Directors’ Report

The Directors present their annual report for the year ended 31 December 2023.

Principal activities

The principal activities of the Group consist of the business of insurance. The Group is

licensed to carry on general and long-term business. The Group is also authorised to provide

insurance management services.

Review of business

The Company

MAPFRE Middlesea p.l.c. (the ‘Company’) registered a profit before tax of €9.9 million

during the financial year ended 31 December 2023 (“FY 2023”) compared to the restated

€6.6 million registered in the previous financial year (“FY 2022”) with post-tax profits of

€6.7 million, compared to the restated €4.2 million in FY 2022.

On 1 January 2023, the Company adopted two new accounting standards, IFRS 17 Insurance

Contracts and IFRS 9 Financial Instruments. IFRS 17 as adopted by the EU, became effective

for annual periods beginning on or after 1 January 2023, whilst in the case of IFRS 9,

although effective for years beginning on or after 1 January 2018, the Company applied the

temporary exemption for qualifying insurers to apply such standard together with IFRS 17.

While IFRS 17 does not change the economic reality nor the underlying profitability of the

Company, over the lifetime of the contracts, it resulted in significant changes in accounting

recognition, measurement, and disclosures.

The adoption of IFRS 17 necessitated the restatement of the 2022 comparative figures which

also implied the restatement of the opening Statement of Financial Position as at 31

December 2021. The restated 2022 did not significantly vary from those reported the

previous year with a further Day 1 transitional gain reported directly into the Retained

Earnings resulting from the changes arising out of the projection of all claims incurred

liabilities discounted to net present value together with a risk adjustment.

Premiums written by the Company reached €95.72 million (2022: €87.1 million), an 9.9%

increase over FY2022, with growth in all classes of business but notably in Motor, Health and

Property. MAPFRE Middlesea p.l.c. remained the leader of the non-life market although the

Company’s market share reduced marginally from the previous year following the receipt of

provisional market data as the market registered a growth above that of the Company's.

Technical performance in the non-life business improved compared to the previous year with

a reduction in frequency and number of reported claims in Motor and a significant release in

previous years losses particularly from Motor, Marine Hull and Liability portfolios. Group

life business, though returning a satisfactory result, yielded a lower return as compared to the

comparative figures as net claims incurred almost doubled.

The insurance service result increased to €12.2 million from the restated €5.9 million of FY

2022, a 104.8% growth. Insurance revenue grew by 10.1% reflecting the growth in premium

written. Claims frequency improved in Motor as did the number of claims reported and

projected for the current year, which management concurs to have been likely derived from

an improved enforcement of road regulations throughout the year.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

The Company - continued

On the other hand, the number of claims in Health and Travel increased significantly when

compared to FY 2022 with the latter reflecting the return to full normality following the

pandemic. Ensuring premium adequacy was high on the agenda and tariffs adjustments were

made particular in Motor to mitigate the increasing cost of repairs and vehicle parts due to

inflation and rising shipping costs. The impact of large losses was higher in Motor compared

to 2022 which were however offset by favourable run-offs. The net combined ratio in Motor

improved marginally to 90.2% from the 99.5% registered in FY 2022, which is a significant

improvement and a step towards ensuring that the Motor portfolio gives an adequate return

for years to come, although the ratio needs to be read in the light of the improved frequency

that is not guaranteed for the coming year and the improved run-off that goes through

fluctuations over the years. The whole non-life portfolio closed with a net combined ratio of

85.6% up from the 90.5% registered the previous year again due to a significant improved

run-off and a lower overall impact from large losses.

As the economy continued to grow above the Eurozone average, the impacts of the ongoing

Ukrainian war and the recent Hamas-Israeli conflict on the world economy, inflation still

keeping its head up worldwide, and interest rates not easing, all had an impact on Company

expenses. Margins continue to be squeezed and in particular in non-life business the rising

claim costs has required close monitoring of each line of business, ensuring pricing adequacy

whilst introducing changes in the products offered, taking on risk that is within the

Company’s risk appetite to maximise profit.

Business and client retention remains a major challenge as clients seek insurance cover that

suits their needs at the right price. The Company remains focused on offering its clients a

better service directly or through its numerous intermediaries, even if remotely. The

Company continues to roll-out its implementation of its new insurance IT system, now also

including Agents, heading towards the critical migration stage that would see the new system

being the main underwriting system for the Company. This together with upgrading its

technological platforms will bring the Company closer to its clients. As progress is made in

rolling further products onto the new system, the Company is aware of the inherent risks that

an overhaul of the core IT system brings about both to resources and operations and

Management plans to ensure transition is done in a way to mitigate such risks.

The Company’s net investment return amounted to €2.0 million compared to the €1.1 million

in FY 2022 with a significant improvement emanating from fair value movements on Equity

portfolio which in FY 2022 had sustained losses. No dividend was received from MAPFRE

MSV Life p.l.c. during 2023 whilst in 2022 a contained dividend to its shareholders after an

absence of two years was made of which the Company received a net 1.00 million. Due

consideration is taken of the Solvency position of MAPFRE MSV Life p.l.c. in determining

the level of dividend to be paid. The economic environment last year and the significant fair

value losses in 2022 had put a strain on the Solvency of the life company and management

continued to take all necessary actions during 2023 to maintain the Solvency position in an

adequate level in line with its risk appetite. Revaluation of investment property held by the

Company rendered a marginal gain of €0.1 million against a loss of €0.6 million for 2022.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

The Company - continued

Comparative Company results also included a €0.5 million recovery from the liquidation of

Progress Assicurazioni S.p.A. equivalent to 6.35% of a subordinated loan that the Group had

given to the then Italian group undertaking.

The Shareholder’s Funds of the Company at €81.7 million saw an increase of 4.3% during

FY 2023 resulting from the profit for the year exceeding the payment of dividend for FY

2022 and positive investment value movements in equity. Net Asset Value per share as at 31

December 2023 amounted to €0.89.

MAPFRE Middlesea p.l.c.’s solvency position remained strong with net assets remaining

adequately above the capital requirements under Solvency II with the cover being reported in

the Solvency and Financial Condition Report (SFCR) to be published by the Company later

in the year.

MAPFRE MSV Life p.l.c.

MAPFRE MSV Life p.l.c. (“MAPFRE MSV Life” and “MMSV”) registered a profit before

tax of €14.6 million for FY 2023, up compared to a restated €2.5 million registered for the

previous year. Profit after tax is recorded at €9.6 million, compared to a €2.1 million in the

previous year.

Similar to the Company, MAPFRE MSV Life also adopted the new accounting standards.

IFRS 17 ‘Insurance Contracts’ and IFRS 9 ‘Financial Instruments’ and also applied the

temporary exemption for qualifying insurers to apply IFRS 9 together with IFRS 17. While

IFRS 17 does not change the economic reality nor the underlying profitability of MAPFRE

MSV Life over the lifetime of the contracts, it resulted in significant changes in accounting

recognition, measurement, and disclosures.

The adoption of IFRS 17 necessitated the restatement of the 2022 comparative figures. The

restated 2022 comparative figures have to be read in the context of a Day 1 transitional gain

reported directly into the Retained Earnings on the Statement of Financial Position, the

derecognition of the Value of In-Force Business, the impact of interest rates on the assets

matching the term business, and the timing differences in the accounting profit recognition.

The financial performance in 2023 was characterised by positive contributions from

insurance activities and income generated from higher interest rates, in spite of the

challenging economic and financial landscape during the year.

The first half witnessed the US regional banking crisis and the subsequent takeover of Credit

Suisse by UBS. Geopolitical anxieties remained elevated due to the ongoing war in Ukraine

and the eruption of the Hamas-Israel conflict. Despite these headwinds, the global economy,

particularly the US, demonstrated remarkable resilience. Growing confidence in central

banks’ ability to curb inflation, fuelled expectations of interest rate cuts in 2024, spurred a

recovery in equity markets. Notably, bond benchmark yields closed the year near their

previous year-end levels, underscoring the market’s cautious optimism.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

MAPFRE MSV Life p.l.c. - continued

Total business written for financial year 2023 totaled €201.3 million, a decrease of 21.0%

over the prior year, on account of lower demand for single premium With-Profits business,

which was in line with expectations. Competition from bank deposits and government debt

issues affected adversely the re-investment of maturing policies.

On the other hand, MMSV met the challenges associated with the prevailing interest rate

scenario by taking the opportunity to accelerate its product diversification efforts with the

launch of short-term Unit Linked campaign products. These proved to be extremely popular

with the retail investors looking for short term guaranteed income and capital products.

Regular premium business results were also satisfactory.

The resilience of the local economy was reflected across several economic sectors

particularly in terms of a heightened activity in the property market leading to a robust

demand in mortgage loans, which generate demand opportunities in life insurance protection.

Long-term regular savings, primarily retirement savings, continued to exhibit a sustained

demand through personal pension plans and to a lesser degree, through voluntary

occupational pensions schemes.

Net claims incurred decreased to €261.6 million through the year compared to a prior year

€289.7 million largely as a result of a decline in maturing contracts. A proportion of these

maturing contracts were subsequently re-invested in new medium to long-term contracts.

Total assets increased by 2.1% to stand at €2,319.7 million by the end of 2023.

Total shareholders’ funds at the close of 2023 amounted to €165.4 million (2022 restated:

€155.8 million), an increase of 6.1% over the previous year and above the minimum solvency

guidelines. The end of year Solvency Capital Requirement ratio is expected to improve

compared to the corresponding 2022 figure. Through its risk management framework, the

company actively manages its insurance, market and operational risks to preserve its financial

stability and maintain its solvency ratio within its defined risk tolerance.

The shareholders of MMSV are wholly committed to ensure that the company remains

adequately capitalised at all times to sustain business growth and to meet Solvency Capital

Requirements in line with the Solvency II framework.

The MMSV With Profits Fund stood at €1.91 billion at 31 December 2023 (2022: €1.89

billion). The fund registered a marginal growth as the positive price movement and the

income generated was contrasted by net fund outflows through an excess of claims, mainly

maturities, over premia.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

MAPFRE MSV Life p.l.c. - continued

The investment strategy of MMSV’s With Profits fund is to hold a diversified range of

quality assets, spread across different geographies and currencies to mitigate market and

concentration risk. This asset diversification together with the robust investment management

process, the expertise of the asset managers engaged, and the company’s track record of

investment management continue to be fundamental in managing policyholders’ assets in this

challenging and ever more volatile investments market environment.

As financial assets recovered from the 2022 market lows, the With-Profits Fund registered a

total investment gain of €165.84 million generating a positive return of 8.64%. This

performance still did not manage to recoup the investment losses incurred in 2022, which had

amounted to €270.4 million. All asset classes, with one exception, contributed positively to

the overall investment return, particularly the equity allocation. Notwithstanding this positive

investment result, the unprecedented steep price falls in fixed income securities in 2022

remain largely unrecovered as interest rates remained high.

In March 2024, the Board of Directors of MAPFRE MSV Group approved a resolution

whereby differential rates of Regular Bonuses were declared in respect of With-Profits plans

held with MAPFRE MSV Life for the year ended 31 December 2023. These amounted to

2.40% for the Comprehensive Life Plan (regular and single premium policies), 2.50% in

respect of the Comprehensive Flexi Plan (regular and single premium policies), 2.50% under

the Single Premium Plan and 2.50% under the With-Profits options of the Investment Bond,

Retirement Plan and of the Personal Pension Plan. On the ‘Old Series’ Endowment and

Whole Life policies, a Regular Bonus of 2.00% of the basic sum assured plus bonuses was

declared.

In addition, the Board also announced the declaration of a Final Bonus for plans in force for

more than 10 years in respect of Regular Premium Comprehensive Life Plans and

Comprehensive Flexi Plans and Single Premium Plans. A Final Bonus was also declared for

additional top-up premiums on these plans provided where top-up contributions where made

at least 10 years before Maturity. For Regular Premium policies, the Final Bonus is expressed

as a flat percentage plus a percentage for every year in force after a specified number of years

in force as shown in the table below. Final Bonuses will be paid on the value of the Policy

Account as at the date of death or maturity between 1 May 2024 and the next bonus

declaration in accordance with the following table:


Product	Final Bonus Flat Rate %	Rate per Year in Force	After Years in Force
Comprehensive Life Plan ( Regular Premium)	4.00%	1.30%	23
Comprehensive Flexi Plan (Regular Premium)	Nil	1.00%	20
Single Premium Plan	4.00%	2.50% (capped at 15.00%)	10
Comprehensive Life Plan (Single Premium)	4.00%	2.50% (capped at 15.00%)	10
Comprehensive Flexi Plan (Single Premium)	4.00%	2.50% (capped at 15.00%)	10

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

MAPFRE MSV Life p.l.c. - continued

The Board of MAPFRE MSV Life also approved a Regular Bonus of 2.40% on those Secure

Growth policies which formed part of the portfolio of business transferred to MAPFRE MSV

Life from Assicurazioni Generali S.p.A. during 2000. Finally the Board also approved a

Regular Bonus of 2.00% on the ALICO 78 policies and a Regular Bonus of 2.00% on the

ALICO 66 polices which formed part of the portfolio of business transferred to MAPFRE

MSV Life in 2011 from American Life Insurance Company (“ALICO”).

Notwithstanding the prudent investment policy adopted by MAPFRE MSV Life, past

performance is no guarantee for the future. Although MAPFRE MSV Life’s With-Profits

investments have generally provided policyholders with stable and satisfactory returns when

compared with other similar investment products, in the light of the current uncertainty in the

capital markets, investment returns could fluctuate further. Fair value movements and

investment returns impinge directly on the rates of bonuses declared by the company. Regular

Bonuses are therefore expected to vary over the lifetime of the policy whilst Final Bonuses

are likely to be highly volatile and very dependent on the investment performance of the

company.

In 2023, the life insurance market in Malta saw a further contraction as inflation remained

elevated and a proportion of maturing insurance saving policies migrated to other financial

sectors.

The 2023 regular bonus rates on core products represent an increase of 1.50% from the 2022

declaration. This reflects the improved investment performance of 2023.

The 2022-2024 Strategic Plan execution remains our top priority in ensuring the present and

future success of the company. Good progress continues being made along the three main

strategic pillars of; revenue streams diversification; data and digital transformation and

excellence in customer service. Together with these three pillars, sustainability has also

featured prominently on the company’s agenda.

In 2023, MAPFRE MSV Life launched three single premium Unit-Linked campaign

products. This is in line with our revenue streams diversification strategy. Unit-Linked

products can continue to further enhance our value proposition in the savings and investment

space. Unit-linked products also represent an opportunity to broaden our customer base by

appealing to other segments of the market. Gradual but sustained growth continues to be

registered in pension savings.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

MAPFRE MSV Life p.l.c. - continued

Private pensions savings remains significantly underdeveloped and underfunded, and thus

represent a significant growth opportunity over the coming years, providing the economy

with a much-needed elements of strengthening and diversification of pension incomes. Apart

from the pension sustainability challenges, the projected country’s economic growth

trajectory, opens a pensions adequacy reality for future generations as the gap between the

state pension provided and the employment income before retirement continues to widen. The

company continues to invest in product development, IT systems and processes to offer

solutions which are more accessible to policyholders to help them save and invest for their

financial wellbeing along the different stages of their lifecycle including the retirement phase.

There were no significant insurance risks impacting the portfolios of business during the year,

and actuarial assumptions used in the valuation of policyholder obligations are regularly

updated to reflect our experience and in conformity with the relevant reporting standards.

Demand for life protection was in line with expectations. Locally, demand for life protection

continues to be strongly correlated with the demand for home loans. The need to have life

protection as a basic element of financial planning remains underappreciated. Promoting the

importance of having adequate levels of insurance is also part of our responsibilities to build

more financially secure and resilient communities.

The demand for With-Profits single premium contracts remained muted when compared to

previous years. A lower demand for this line of business was expected given the prevailing

financial and competitive landscape. On the positive side, a better-than-expected performance

was registered in terms of Unit Linked single premium business. The launch of short-term,

guaranteed Unit-Linked products proved very attractive to the retail investor.

Regular savings business remains a core component of our business strategy. Through our

regular savings products we aim to serve the need of the broader market through long-term,

accessible, flexible and efficient solutions. While, pensions savings is seen as a growth area,

promoting savings for retirement is also an obligation and responsibility. We want to support

our future generations of pensioners in building and maintaining their financial wellbeing and

aspirations.

The life protection line of business demand was in line with expectations. Locally, demand

for life protection continues to be strongly correlated with the demand for home loans. The

need to have life protection as a basic element of financial planning remains

underappreciated. The company feels that promoting the importance of having adequate

levels of insurance is also part of its responsibilities to build more financially secure and

resilient communities.

There were no significant insurance or financial risks impacting the portfolios of business,

during the year, and mortality assumptions used in the valuation of policyholder obligations

remained appropriate.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

Other subsidiaries

The other subsidiaries within the Group, though not significant to the size of the Group, had a

mixed contribution to the results of the year.

BEE Insurance Management Limited (‘BEE’) and its subsidiary Euro Med Risk Solutions

Limited which offer Insurance and Non-Insurance management services saw a pick-up in

third-party revenue due to fee revision to reflect rising personnel cost. During FY2022 BEE

commenced servicing the Group’s insurance entities in the Information Technology sphere. A

combined profit of €0.2 million was registered in line with the €0.2 million in the

comparative period.

Church Wharf Properties Limited holds a property within the Regeneration of the Grand

Harbour Area. A loss of €0.4 million was recorded in the year, compared to negligible gain

registered at the end of 2022, resulting from a change in methodology applied for the

valuation of property. The directors continue to monitor the evolution of this project which

gives a potential future increase in value of this investment.

The Group

The Group registered a profit before tax of €24.0 million in FY 2023 compared to a restated

€8.3 million achieved in FY 2022. Profit after tax for FY 2023 closed at €15.9 million as

compared to the restated €5.6 million achieved in FY 2022. Group business written reaching

€297.0 million saw a drop of 13.2% against that registered in FY 2022, with both insurance

companies remaining leaders in their respective markets.

MAPFRE Middlesea’s Group capital and reserves attributable to shareholders at 31

December 2023 amounted to €88.2 million (2022 restated: €80.2 million) on a consolidated

basis with a net asset value per share of €0.96 as at 31 December 2023 mainly as the result

for the year outweighed the payment of dividend by MAPFRE Middlesea.

Whilst as a Group we have an important role to provide our customers with prosperity and

peace of mind, we acknowledge that we have a wider commitment to society by also

supporting those who are not our customers. Over the years we have developed a Corporate

Social Responsibility (CSR) policy framework which encompasses shareholders, the

environment, people, communities and customers. Through our CSR programme we

cooperate with and assist a number of public and private institutions, NGOs, museums,

foundations and associations who share similar goals and values as us.

Sustainability is also very high in our agenda. In line with the MAPFRE Group's

Sustainability Plan, the Group is committed to be carbon neutral by the end of 2030. To this

effect a number of initiatives are being implemented and more will be formulated as we move

towards this important goal. Good progress is also being registered in terms of the

environment, social and governance (ESG) dimensions.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

The Group - continued

As a financial institution, we are aware of our responsibility and contribution towards

sustainability and that this will primarily depend on how the Group allocates capital through

its investing decisions. In terms of the Sustainable Financial Disclosure Requirements

(SFDR), our With-Profits Fund, is currently classified as Article 6. The intention is to

transition this Fund to an Article 8 classification. Our Unit-Linked fund choice provides a

wide array of Article 8 funds. The Group obtained ISO 14001 Environment Management

Systems certification. We have developed a set of key performance indicators which help us

to gauge our pace and level of progress in achieving our sustainability goals.

Other initiatives like remote working, files digitilisation, electronic communication and

promotion of hybrid and electric vehicles, and the installation of photovoltaic panels on the

roofs of both Head Offices, lower our carbon footprint and move us closer to our goal of

becoming carbon neutral. The Group can also boast to have a diverse multinational workforce

with high levels of female participation in senior management positions. We are also proud to

have achieved the target set in terms of the gender pay gap metric. In 2022 the Company has

also joined the MESGA, the Malta ESG Alliance that brings together the main private

companies on the island that foster ESG initiative and can accelerate the sustainability of

Malta.

Our people are our most valued asset. During the year, training and development continued to

feature high on our agenda. Strategic key performance indicators have been set to ensure that

employees achieve their full potential while the customer benefits from the competence and

professionalism of our staff. We are committed to provide our employees with internal and

external training opportunities in Malta as well as overseas. We are very pleased with the

Employees Net Promoter Score (ENPS) results being obtain. Our human resource strategy is

based on recruiting the best talent, retaining talent and retraining to ensure we have the right

skill set for the present and future needs of the Company.

The Board expresses its gratitude and appreciation to the management and staff of all the

Group companies for their commitment and contribution to another satisfactory year, to

intermediaries for their continued support and to the many loyal customers for placing their

trust in MAPFRE Middlesea p.l.c. and MAPFRE MSV Life p.l.c..

Going forward we will maintain strong focus on our customers by continuously assessing our

business processes and operations in order to provide good value and excellent service. To

this end, we will continue to invest and innovate in information technology. During 2023 we

progressed on our major IT programmes in both insurance companies. MAPFRE Middlesea,

whilst still suffering some delays, achieved a number of goals in its plan for the year,

including the launch of further Motor products and the roll-out to a number of Agents

following the roll-out to Tied Insurance Intermediaries and Brokers the previous year, and is

heading for critical milestones in its roll-out of further products and policy and claim

migration from the legacy system in the coming months. MAPFRE MSV Life has in essence

completed the shift to the new system and moved to a support and maintenance phase. Over

the next year, the Group looks forward to consolidate on these achievements and to further

deliver in terms of the customer journey experience and its digital transformation.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

The Group - continued

Data and Digital remain cornerstones of our strategic plan. We are living in an era where the

pace of technological development is unprecedented. Developments in Artificial Intelligence

(AI) and generative AI dominated 2023. In the years to come this new technology is expected

to change the way people interact and work. This reinforces our conviction that the

investment in our core system and the digital ecosystem around it remains fundamental to

compete in this data driven and digital future. Increased automation is key to improved

efficiencies, scaling up to increased volumes without incurring a corresponding increase in

cost and to be able to deploy human capital towards higher value-added functions. Ambitious

key performance indicators have been set in terms of straight through processing and

automation.

We consider our distribution footprint in Malta to be one of our key strengths. We are going

to persist on the multichannel approach, we want the client to receive the same price from the

Company whatever channel he chooses to approach the Company: Direct, Agents, Tied

Insurance Intermediaries or Brokers. In MAPFRE MSV Life, whilst bancassurance remains

the most important distribution channel, we continue to invest in our TII network and direct

distribution channels to ensure that our customers benefit from the widest possible

accessibility and improved level of service. This is also another dimension to the MAPFRE

Group strategic pillar of distribution and diversification.

Customer experience remained central to our strategy. In 2023, we have re-organised its

commercial structure in order to enhance the overall client experience across all channels and

to gain operational efficiency, a holistic commercial strategy focused on the respective

individual distribution channels covering MAPFRE Malta’s value proposition across life and

non-life. As a consequence of this initiative, our front office personnel at Regional offices,

can now dedicate more time to look after our clients’ needs when they visit our office without

increasing waiting time. This is an overall improvement in the service level we are offering to

our customers which is confirmed by the regular customer satisfaction surveys conducted.

Outlook

The outlook of the Board of Directors for 2024 remains one of cautious optimism. The local

economy is expected to remain resilient in the context of a continued challenging

environment as inflationary pressures persist for most of the year. The global capital markets

outlook is mixed, with many experts predicting the global economy to grow moderately and

markets to remain volatile. In 2024, the world will go through 40 elections including four of

the world’s five most populous countries. Inflation and geopolitical risks remain the main

sources of uncertainty.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

Outlook - continued

Within this context, inflation will have an impact on all the services that the Group receives

both in running its operations and also from a claims perspective. Correct pricing will be key

to ensure that the demand for general business products grows sustainably yielding an

adequate return. Demand for the regular protection and savings business are expected to be

sustained. On the other hand, demand for lump sum investments should improve as inflation

subsides and central bank start to ease monetary policy. However, competition for liquidity

from financial institutions and local government debt issuance to finance its borrowing needs

are expected to persist.

The demand for non-life insurance cover is expected to remain strong as the economy grows

and lifestyle and spending patterns change. Addressing the customer needs whilst ensuring

price adequacy will be critical to the growth of our business written volumes. The Company

will need to adapt to be able to position itself to exploit the many opportunities that will

certainly arise. The Maltese life insurance market has, for a number of years, registered

growth that is significantly above the average in Europe but remains a relatively underinsured

market. Although life insurance companies are playing an increasingly important role in

Maltese household savings, comparative studies with other European life insurance markets

continue to show that whilst the Maltese life insurance market has grown significantly over

previous decades, the life insurance density and life insurance penetration remain below the

European average. We therefore continue to see attractive potential for an uplift in life

protection and in long-term and retirement savings in the local life insurance market.

On the regulatory front, the landscape continues to experience important developments.

Digital Operational Resilience Act (DORA) will take center stage, with 2024 expected to be

the year of implementation by the Group in preparation for its effective date in 2025. The

adoption of the ambitious Retail Investment Package by the European Commission in May

2023 marks a significant regulatory milestone that calls for an in-depth impact assessment.

Sustainability regulatory developments maintain their pace of development, featuring new

European Sustainability Reporting Standards, the impending transposition of the Corporate

Sustainability Reporting Directive (CSRD) into national law and the review of the

Sustainable Finance Disclosure Regulation (SFDR), amongst others. Agreement was reached

on amendments to the Solvency II Directive and new rules on insurance recovery and

resolution (IRRD). The Insurance Distribution Directive and the Packaged Retail and

Insurance-Based Investment Products (PRIIPs) Regulation remain the subject of reviews.

Purely at the local level, the New Regime regulating Insurance Undertakings carrying Long-

Term Business and the distribution of contracts of insurance as Retirement Products being

proposed by the Malta Financial Services Authority will continue to be discussed and

debated, shaping the future regulatory framework under which these products will eventually

operate.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Review of business - continued

Principal Risks and Uncertainties

The Group’s principal risks and uncertainties are further disclosed in Note 4 dealing with

management of risk as supplemented by Note 3 relating to the use of accounting estimates

and judgements in applying accounting policies, and Note 24 on insurance contract liabilities,

reinsurance contract assets and investment contracts liabilities covering assumptions

underlying their valuation.

Results and dividends

The consolidated profit or loss account is set out on page 47. A gross dividend in respect of

year ended 31 December 2023 of €0.073057 per share amounting to a total dividend of

€6,721,231 is to be proposed by the Directors at the forthcoming annual general meeting.

This is equivalent to a net dividend of €0.048913 per share amounting to a total net dividend

of €4,500,000 (2022: €3,500,000).

Directors

The Directors of the Company who held office during the period under review were:

Martin Galea

Jose Ramon Alegre (resigned as from 1 January 2024)

Antoinette Caruana

Gordon Cordina

Jose Maria del Pozo

Jose-Luis Jimenez

Etienne Sciberras

Robert Suban (appointed until 28 April 2023)

Godfrey Swain (appointed from 28 April 2023)

Paul Testaferrata Moroni Viani

In accordance with the Articles of Association of the Company, all Directors retire from

office at the Annual General Meeting and are eligible for re-election or re-appointment.

Further information is given in the Statement of Corporate Governance.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Statement of Directors’ responsibilities for the financial statements

The Directors are required by the Insurance Business Act, 1998 and the Companies Act, 1995

to prepare financial statements which give a true and fair view of the state of affairs of the

Group and the Company as at the end of each reporting period and of the profit or loss for

that period.

In preparing the financial statements, the Directors are responsible for:

• ensuring that the financial statements have been drawn up in accordance with

International Financial Reporting Standards as adopted by the EU;

• selecting and applying appropriate accounting policies;

• making accounting estimates that are reasonable in the circumstances;

• ensuring that the financial statements are prepared on the going concern basis unless it

is inappropriate to presume that the Group and the Company will continue in business

as a going concern

The Directors are also responsible for designing, implementing and maintaining internal

control as the Directors determine is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error, and that

comply with the Insurance Business Act, 1998 and the Companies Act, 1995. They are also

responsible for safeguarding the assets of the Group and the parent Company and hence for

taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements of MAPFRE Middlesea p.l.c. for the year ended 31 December 2022

are included in the Annual Report 2022, which is published in hard-copy printed form and

also made available on the Company’s website. The Directors are responsible for the

maintenance and integrity of the Annual Report on the website in view of their responsibility

for the controls over, and the security of, the website. Access to information published on the

Company’s website is available in other countries and jurisdictions, where legislation

governing the preparation and dissemination of financial statements may differ from

requirements or practice in Malta.

The directors confirm that, to the best of their knowledge:

• the financial statements give a true and fair view of the financial position of the Group

and Company as at 31 December 2023, and of its financial performance and its cash

flows for the year then ended in accordance with International Financial Reporting

Standards as adopted by the European Union on the basis explained in Note 1 to the

financial statements; and

• the Annual Report includes a fair review of the development and performance of the

business and the position of the Group and Company, together with additional

information of the principal risks and uncertainties that the Group and Company face.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Information pursuant to Capital Markets Rule 5.64

The Company has an authorised share capital of €31,500,000 divided into 150,000,000

ordinary shares with a nominal value of €0.21 each. The issued share capital of the Company

is €19,320,000 divided into 92,000,000 ordinary shares of €0.21 each. The issued shares of

the Company consist of one class of ordinary shares with equal voting rights attached.

The directors confirm that as at 31 December 2023, only MAPFRE Internacional (55.83%)

and Bank of Valletta p.l.c. (31.08%) held a shareholding in excess of 5% of the total issued

share capital.

Pursuant to the Company’s Articles of Association, the appointment of Directors to the Board

is reserved exclusively to the Company’s shareholders (in line also with general and

commonly accepted practice in Malta). Shareholders with 11% or more of the shares in issue

are entitled to appoint one director for every 11% holding, whilst the other shareholders are

entitled to appoint the remaining Board members at the Annual General Meeting in

accordance with the provisions of the Articles of Association. The Chairman shall be

appointed by the Board of Directors.

The rules governing the appointment and replacement of the Company’s directors are

contained in Articles 93 to 102 of the Company’s Articles of Association.

The Directors can only issue shares following an extraordinary resolution passed in the

General Meeting. This and other powers vested in the Company’s Directors are contained in

Articles 84 to 90 of the Company’s Articles of Association.

The Memorandum and Articles of the Company may be amended by means of an

extraordinary resolution of the Company during general meetings.

There are no agreements between the Company and the Directors on the Company’s Board or

employees providing for compensation on termination or cessation of their office for any

reason whatsoever.

It is hereby declared that as at 31 December 2022, information required under Capital

Markets Rules 5.64.2, 5.64.4, 5.64.5, 5.64.6, 5.64.7 and 5.64.10 is not applicable to the

Company.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Directors’ Report - continued

Going concern

The Directors, as required by Capital Markets Rule 5.62 have considered the Group’s and

Company’s operational performance, the statement of financial position as at year end as well

as the business plans for the coming year, and declare that they have a reasonable expectation

that the Group and the Company have adequate resources to continue in operational existence

for the foreseeable future. For this reason, in preparing the financial statements, the Group

and Company are in a position to continue operating as a going concern for the foreseeable

future.

Auditors

The auditors, KPMG, have indicated their willingness to continue in office and a resolution

for their re-appointment will be proposed at the Annual General Meeting.

Information pursuant to Capital Markets Rule 5.70

There were no material contracts in relation to which a Director of the Company was directly

or indirectly interested.

Information pursuant to Capital Markets Rule 5.70.2

The Company Secretary is Dr Daphne Sims Dodebier and the registered office is Middle Sea

House, Floriana, Malta.

Information pursuant to Capital Markets Rule 5.68

We, the undersigned, declare that to the best of our knowledge, the financial statements

prepared in accordance with the requirements of International Financial Reporting Standards

as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and

profit or loss of the Company and its subsidiaries and that this report includes a fair review of

the development and performance of the business and the position of the Company and its

subsidiaries, included in the consolidation taken as a whole, together with a description of the

principal risks and uncertainties that they face.

Signed on behalf of the Company’s Board of Directors on 25 March 2024 by Martin Galea

(Chairman) and Godfrey Swain (Director) as per the Directors Declaration on ESEF Annual

Financial Report submitted in conjunction with the Annual Report and Accounts 2023

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement

1. Introduction

In accordance with Rule 5.94 of the Capital Markets Rules, an issuer whose securities are

admitted to trading on the Malta Stock Exchange should endeavour to adopt the principles as

promulgated within Appendix 5.1 of the Capital Markets Rules entitled The Code of

Principles of Good Corporate Governance (‘the Code’). Moreover, the issuer is obliged to

prepare a report disclosing both compliance and non-compliance with the said principles and

the Company’s auditors are to include a report on the Corporate Governance Statement in the

Annual Financial Report of the Company.

The Board of Directors (‘the Board’) of MAPFRE Middlesea plc (the ‘Company’ or ‘MMS’)

acknowledges that compliance with the said Code is not mandatory, however notes that the

principles are designed to serve as a guide for the Board and the Company’s Management in

the pursuit of objectives that are in the interests of both the Company and its stakeholders.

The Board, therefore, firmly upholds the principles therein contained as guaranteeing the

required standards of accountability, transparency and integrity. The Board continues to

strive to adhere to the Code as well as to maintain the highest standards of disclosure both in

relation to compliance with the code as well as in relation to explaining the rationale behind

the instances of non-compliance.

As shall be evidenced by the information set out in this Statement and that contained in the

Remuneration Statement and the Report of the Remuneration Committee to the Shareholders,

the Company believes that it has, save as otherwise indicated herein, not only complied with

the provisions of the Code throughout the accounting period under review but also acted in

accordance with the spirit of the Code. In the Non-Compliance Section, the Board then

outlines the limited instances where there has been a departure from, or non-application of,

the principles as contained within the Code and the reasons therefore, in accordance with the

same Code.

2. Compliance with the Code

Principle 1 – The Board

Good business, well done, is a force for good in society. Within this context, the Board’s role

and responsibility is to lead the Company, to discuss and approve the strategy for long-term

sustainable value and to exercise good oversight, challenging the Management and Internal

Control Functions where necessary to this end.

As at 31 December 2023 the Board was composed of a non-executive Chairman and eight

non-executive Directors. The Directors, appointed in terms of the Memorandum and Articles

of Association of the Company, are all competent, trustworthy and solvent individuals and

thus fit and proper to direct the business of the Company. The maximum number of Directors

pursuant to the Memorandum and Articles of Association is ten. Martin Galea was re-

appointed as a non-executive Chairman during the Board meeting held on the 28 April 2023,

which followed the Annual General Meeting (AGM) held on the same day.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 1 – The Board - continued

During the said AGM the two institutional shareholders re-appointed the retiring Directors

Jose Ramon Alegre, Gordon Cordina, Martin Galea, Jose-Luis Jimenez, Jose Maria del Pozo

and Etienne Sciberras, while the other shareholders re-appointed the retiring Directors

Antoinette Caruana and Paul Testaferrata Moroni Viani during the election for directors.

Godfrey Swain was newly appointed by the shareholder Bank of Valletta p.l.c in order to

bring the total number of Directors to nine.

All of the Directors of the Company are approved by the Regulator as being fit and proper to

direct the business of the Company and are deemed to conduct themselves with honesty,

competence and integrity. Both on an individual level and collectively, the Members of the

Board are deemed to possess the necessary skills and experience to make effective

contribution to the leadership and decision-making processes of the Company as reflected

within the Company’s strategy and policies. The Board moreover exercises prudent and

effective controls in order to achieve both short and long-term sustainability of the business

and assesses the compatibility of the MAPFRE Group policies with local legal and regulatory

requirements, adapting them where appropriate.

Effective boards ensure that the Company operates with a clear sense of purpose and

collective vision and the Board liaises closely with the President and Chief Executive Officer

(‘CEO’) of the Company in a consistent manner in order to ensure that the Board receives

timely and complete information in relation to the business of the Company and management

performance. This enables the Board to maintain effective oversight of the decision-making

process and to exercise the aforementioned controls. Javier Moreno, appointed CEO on the

31 March 2021, continued to hold the position of CEO throughout 2023.

As was customary in previous years, at the Board Meeting held subsequent to the AGM, the

Board delegated specific responsibilities to a number of Board Committees, namely the Audit

Committee, the Risk and Compliance Committee, the Investments Committee and the

Remuneration Committee, each of which operated under their respective formal terms of

reference as approved by the Board.

Further detail in relation to the Committees and the responsibilities of the Board is provided

under Principles 4 and 5 of this Statement.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 2 – Chairman and CEO

The positions of Chairman and CEO are held by different individuals with a clear

demarcation between the leading of the Board by the former and the CEO’s management of

the business of the Company, despite the strong cooperation between the two.

The Chairman is independent and is responsible for the overall effectiveness of the Board,

promoting open debate and facilitating constructive discussion. He sets the Board's agenda

and ensures that all the Board’s decisions are supported by comprehensive and timely

information. The Chairman also ensures that the Board discusses the pertinent issues with

adequate depth, that the opinions of all the Directors are taken into account and encourages

active engagement by all the members of the Board to constructively challenge Management

where necessary and generally promote the effective functioning of the Board.

The CEO, on the other hand, is charged with the leadership of the Management team with the

main role and responsibility of managing the Company’s business in line with its Strategy

and informs and makes recommendations to the Board. Within this context, 2023 was the

second year of the Company's three-year Strategic Plan as developed by Management,

discussed with the Chairman and approved by the Board.

Within the Strategy as approved by the Board, the CEO develops and drives performance and

leads the decisions on all matters affecting the operations, technical performance and

stakeholders of the business save for those matters specifically reserved to the Board or its'

delegated Committees. The Company also has Technical Committees composed of senior

members of the relative technical areas that hold regular meetings and a Management

Committee, bringing together the Chief Officers within MMS under the Chairmanship of the

CEO on a monthly basis.

The positions of the Chairman of the Board and CEO are distinguished accordingly within

the Terms of Reference of the Board of Directors and in practice, there is also a clear division

of responsibility between the former who oversees the Board and the latter's responsibility in

managing the daily business of the Company. Thus the positions remain completely

independent from one another to avoid concentration of authority and power within a single

individual, to differentiate leadership from the running of the business and to maintain clear

lines of accountability and responsibility.

Principle 3 – Composition of the Board

The Board considers and history has shown, that the number of Members as stipulated in the

Memorandum and Articles of the Company are appropriate relative to the size of the

Company and its operations.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2.Compliance with the Code - continued

Principle 3 – Composition of the Board - continued

The combined and varied knowledge, experience and skills of the Board members, including

a broad knowledge of the business of the Company and awareness of statutory and regulatory

requirements, provide a balance of competences, as required, and add value both to the

functioning of the Board and to the direction given to the Company. In this regard the

Company remains committed to non-discrimination, not least in its Boardroom, promoting a

diverse and inclusive culture where Directors’ views are heard, concerns are attended to and

the environment does not tolerate bias, discrimination or harassment of any kind.

The Company’s Articles of Association determine the composition of the Board. The

appointment of Directors to the Board is accordingly reserved exclusively to the Company’s

shareholders, except in so far as an appointment may be made to fill a casual vacancy. All

Directors, as well as some key officials, are required to fulfil the fit and proper regime

prescribed by the Malta Financial Services Authority (‘MFSA’) in line with standard

regulatory due diligence procedures. Moreover, all Directors are required to apply the

necessary time and attention to their duties and limit the number of directorships held in other

companies, thereby also ensuring the proper performance of their functions.

In 2023 the Board was composed exclusively of non-executive Directors, of which eight

were male and one was female. Although not a Director of MMS, the CEO is invited to

attend Board meetings with a view to ensuring a full understanding and appreciation of the

Company's policies and strategy and to provide direct input as may be required for the

Board’s deliberations. In addition, certain members of Senior Management are invited to

report to the Board as and when required, thereby securing effective information flows as

well as fostering a culture of continuous dialogue between the Board and the Company’s

Management.

As at the date of this review, the Board consists of five independent Directors (including the

Chairman) and four non-independent Directors (as indicated on page 21 of the Annual

Report) as defined by the Code.

In determining the independence or otherwise of its Directors, the Board considers, amongst

others, the principles relating to independence of directors contained in the Code, the

Company’s own policies, as well as general principles of good corporate governance.

In relation to Code Provision 3.2.5 specifically the Code requires that the Board states its

reasons if it determines that a director is independent notwithstanding inter alia if the

director: “has served on the board for more than twelve consecutive years”.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2.Compliance with the Code - continued

Principle 3 – Composition of the Board - continued

It is noted in this regard that Paul Testaferrata Moroni Viani (as from April 2022) has served

on the Board for a period of more than twelve consecutive years. The Company however,

retains that Paul Testaferrata Moroni Viani has sufficient experience and maturity to remain

independent of character and objective in his judgment at all times notwithstanding the lapse

of the recommended twelve years.

In terms of Code provision 3.4 each non-executive director has moreover submitted his / her

confirmation in writing that he / she undertakes:

i. to maintain in all circumstances his independence of analysis, decision and action;

ii. not to seek or accept any unreasonable advantages that could be considered as

compromising his / her independence; and

iii. to clearly express his / her opposition in the event that he /she finds that a decision of

the Board may harm the Company.

Principle 4 – The Responsibilities of the Board

The Board acknowledges its statutory mandate to establish and maintain corporate

governance practices that provide clear lines of accountability and responsibility to support

effective decision-making and to monitor the implementation thereof. The Board fulfils this

mandate and discharges its responsibilities through the execution of the four basic principles

of corporate governance namely, accountability, monitoring, strategy formulation and policy

development.

The Board continually and consistently reviews all the different aspects of the Company

within the parameters of the relevant laws, regulations and codes of best practice. It seeks to

ensure adherence to high ethical standards whilst taking into account all stakeholders’

interests, maintaining an effective dialogue with all stakeholders, monitoring the application

of management policies and motivating Company Management.

Principle 5 – Board Meetings

The Board of Directors sets and supervises the strategy and the policies of the Company, both

of which are discussed on a regular basis, and the Board's agenda as well as its' business are

managed in such a way so as to ensure effective supervision of the Company’s operations in

accordance therewith.

The Board meets as often as required to discharge its duties effectively but no less than five

times a year. As aforementioned, specific members of the Management team are invited to

attend Board meetings from time to time, to update and provide the Directors with a direct

report relative to the items on the agenda.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 5 – Board Meetings - continued

A detailed review of the Company's Management Accounts and Key Performance Indicators

(as promulgated by the MAPFRE Group in line with industry norms) is carried out at every

Board Meeting and the background information on various subjects provided, particularly

those requiring the approval of the Board. An update is also provided at every Board Meeting

in terms of the various Company projects and accomplishments by Area, as well as on

regulatory and other relevant events amongst others.

Apart from setting the strategy and collectively promoting the success of the Company, the

Board is actively involved in monitoring progress against the set Budget and Strategy and in

approving material or significant transactions.

The Chairman in conjunction with the Company Secretary ensures that all relevant issues are

on the Board agenda and supported by relevant and complete information. The agenda for

each meeting seeks to strike a balance between long-term strategic objectives and shorter-

term performance matters. Notice of the dates of forthcoming Board meetings together with

all relevant documentation are circulated in advance to all Directors in order to give them

opportunity to consider the information and prepare well ahead of each Board meeting.

Minutes are taken of each and every Board meeting faithfully recording attendance, matters

discussed, action points and resolutions. These minutes are subsequently made available to

all Directors for review, prior to sign off by the Chairman.

Decisions of the Board are taken by majority of those present subject to the Chairman’s

casting vote as may be necessary.

During financial year 2023, the Board of Directors of the Company held seven Board

Meetings which were attended as per below.

Martin Galea (Chairman) (NED, I)7

Jose Ramon Alegre (NED)6

Antoinette Caruana (NED, I)6

Gordon Cordina (NED , I)7

Jose Maria del Pozo (NED)6

Jose-Luis Jimenez (NED)5

Etienne Sciberras (NED)7

Robert Suban (NED, I - appointed until 28 April 2023)2

Godrey Swain (NED, I - appointed on 28 April 2023)*5

Paul Testaferrata Moroni Viani (NED, I)7

NED – Non-executive Director

I – Independent

* With regulatory approval as from 13 July 2023;

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 5 – Board Meetings - continued

The MMS CEO attended all the Board meetings by invitation.

Moreover, during 2023 two Board Briefings were also held in order to provide the Directors

with more detailed information on the subject matter identified as well as to allow

opportunity for deeper discussions of pertinent issues. The focal point of the Directors’

Briefing in June was to review the draft Own Risk and Solvency Assessment prior to

submission to the Regulator including the appropriateness of the Standard Formula approach,

the extent of the Company's solvency, the Own View solvency calculations and the outcome

of the Stress Tests. The second part of the June Briefing was a review of the draft

Methodology Papers being proposed in relation to the implementation of IFRS 17, as

delivered by representatives of Price Waterhouse Cooper in their capacity as external

consultants to the Company.

During the second Briefing held in October the Board carried out an in-depth review of the

developments in the Strategic projects during 2023, being the second year of the three-year

Strategic Plan including the proposed amendments as to the way forward in 2024 and the

relative Budget requirements. In addition, a presentation was delivered by the Chief Actuarial

Officer, Amanda Brown, on the Annual Actuarial Function Report. This detailed presentation

included, amongst others, details of progress achieved on the prior year recommendations, an

actuarial opinion on the Underwriting Policy and on Reinsurance, as well as

recommendations for 2024.

Notices of meeting dates were circulated well in advance of the relative meetings and

meeting packs containing all relevant information, including the minutes of the previous

Board Meeting, were circulated to the Directors ahead of each meeting by the Company

Secretary. Each communication allowed ample opportunity for the Directors to review the

information and prepare for the next scheduled Board or Committee meeting.

Principle 6 – Information and Professional Development

Although no Induction Briefing was delivered in 2023 as the only Director newly appointed

to the Company's Board was already a Director of the subsidiary company MAPFRE MSV

Life plc and thus familiar with the strategy and operations of the MAPFRE Group in Malta,

this was an exception to the general rule. In all other cases where a new Director is appointed

a formal and structured induction programme consisting in a series of presentations and

meetings with members of the Management team of the Company is conducted to enable new

incumbents to familiarise themselves with the Company’s strategy, risk appetite and

operations. New Directors also receive a MAPFRE Corporate comprehensive guide that

includes, amongst others, Directors’ duties and responsibilities.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 6 – Information and Professional Development - continued

During 2023 the members of the Company's Board continued to benefit from the MAPFRE

Group structured Board training and development programme including a full on-line

training schedule available for subscription covering twelve sections with a range of topics

ranging from Operational to Technical and Risk to AML matters. The key objective of the

programme is to contribute to the continued professional development of the Directors and

the Board’s collective awareness of corporate governance, solvency, insurance finance,

strategy and operations.

Moreover, Directors are at liberty to take independent professional advice on any matter at

the Company’s expense where they deem it necessary in order to better discharge their duties

as Directors and they have open access to the advice and services of the Office of the

Company Secretary and that of all other Chief Officers. The Company Secretary remains

mindful at all times of the responsibility of ensuring adherence to Company policies, Board

procedures as well as the facilitation of continual and consistent information flow within the

Board and its Committees.

The CEO is appointed by and enjoys the full confidence of the Board and ensures that

systems are in place to cater for, amongst others, consistent and continuous support and

monitoring of Management, development and training of employees and Directors, as well as

succession planning, as required by the provisions of principle 6.4 of Appendix 5.1 of the

Capital Markets Rules. The CEO, although responsible for the recruitment and selection of

Senior Management, consults with and acts on the advice of the Remuneration Committee

and the Board generally relative to appointments and succession for Senior Management.

Training (both internal and external) of management and employees is prioritised and is

implemented through the Human Resources Department. Several training sessions, both on-

line and live, were also held on various topics during the course of 2023 including on Cyber

Security, Inclusion, Mental Health and Environmental, Social and Governance (ESG)

Awareness.

Indeed during 2023 the Company kicked off an intense and specialised training initiative for

the CEO, Chief Officers and Heads in conjunction with external specialists on Leadership

and Personal Development. The Programme represented a significant investment in the

leadership team intended to boost collaboration, competence and encourage positive

transformation across the Management team with initiatives including individual and team

coaching sessions set to run over a period of eighteen months.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 7 – Evaluation of the Board’s Performance

During the year under review, the Board once again undertook an evaluation of its own

performance, the Chairman’s performance and that of its Committees. The evaluation was

not conducted externally, but rather, the evaluation exercise was conducted through a Board

Effectiveness Questionnaire prepared by the Compliance Function in cooperation with the

Company Secretary and the Chairman. The outcome of the exercise was summarised into a

Report based on the replies of each individual Director that was then submitted to the

Chairman before being circulated amongst all Board members. The Report was then

discussed during an informal off-site meeting amongst the Directors and the Company

Secretary and an action plan developed and committed to.

No requirement for material changes in the governance structure or processes resulted from

this evaluation exercise, however, the emerging action points and recommendations were

implemented within 2023 as co-ordinated by the Company Secretary and overseen by the

Chairman.

Principle 8 – Committees

The activities of the Board and of the Company’s Senior Management team are additionally

supported by the Company’s Board Committees structured in such a way so as to assist in the

guiding and monitoring of particular business processes and specific governance issues. The

said Board Committees are the Audit Committee, the Risk and Compliance Committee, the

Investments Committee and the Remuneration Committee.

The Terms of Reference of all the Board Committees have been set out and approved by the

Board of Directors and by the MFSA.

Audit Committee

The Audit Committee’s terms of reference are modelled on the recommendations of statutory

directives, the Capital Markets Rules and the principles of Corporate Governance, whilst also

reflecting the provisions of the relevant MAPFRE Group principles. The responsibilities of

the Audit Committee include the following:

• monitoring of the financial reporting process

• monitoring of the independence and effectiveness of the Company’s internal control,

internal audit and risk management systems

• monitoring of the audit of the annual and consolidated accounts

• maintenance of communication on such matters between the Board, management, the

external Auditors and the internal Auditors

• making of recommendations to the Board in relation to the appointment of the

external Auditor and the approval of the remuneration and terms of engagement of the

external Auditor following appointment by the Shareholders in general meeting

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 8 – Committees - continued

Audit Committee - continued

• monitoring and reviewing of the external Auditor’s independence and in particular the

provision of additional services

• development and implementation of a policy on the engagement of the external

Auditor to supply non-audit services

• reviewing of actuarial reports

• management of financial risks

• analysis and endorsement of the Annual Internal Audit Plan

• arm’s length nature of related party transactions and

• oversight over the statutory audit process including recommendations to the selection

of the statutory auditor and the setting of the relative fees in accordance with the

provisions of the Statutory Regulations governing statutory audits of public interest

entities within the European Union.

The Committee generally protects the interests of the stakeholders and the shareholders in

particular and assists Directors in ensuring the accuracy of the Company’s financial results

and reporting. It ensures that the Company’s accounting and finance function are robust and

transparent, advises the Board on financial reporting in terms of both the financial statements

and announcements relative to performance and also has oversight of the Internal Audit

Function to ensure adequate resources, independence and follow up on any pertinent audit

recommendations.

In regard to the latter, Internal Audit is an independent appraisal function established to

examine and evaluate the activities of the Company and its subsidiaries. The Internal Auditor

reports to the Audit Committee and attends its meetings. The Internal Auditor is charged by

the Audit Committee with the conducting of business process risk-based audits aimed at

assessing the adequacy of controls and business process efficiency. The Internal Audit Area

also liaises closely with the MAPFRE Group Internal Audit Area to this end.

The Audit Committee moreover ensures co-operation between the internal and external

auditors of the Company.

Furthermore, although no such instances arose within 2023, the Audit Committee also

reviews related party transactions, considering their nature and materiality and approves them

if it deems fit, as well as overseeing the implementation of the Company’s Whistleblower

Policy.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 8 – Committees - continued

Audit Committee - continued

The composition of the Company’s Audit Committee is regulated by the Capital Markets

Rules and the Malta Financial Services Authority is kept informed as to any changes in its

composition. In terms of Capital Markets Rule 5.117.3, Jose Maria del Pozo and Martin

Galea are the members of the Audit Committee with the necessary qualifications, experience

and knowledge to render them competent in accounting and auditing. Jose Maria del Pozo

having held the position of Chief Financial Officer of the MAPFRE Group since 2018 and a

consultant professor for accounting and financial analysis, while Martin Galea is qualified in

accounting and audit with years of experience in company management.

Godfrey Swain was appointed Chairman of the Audit Committee by the Board of Directors in

accordance with Capital Markets Rule 5.117.4 as of 28 April 2023, taking over from Gordon

Cordina. Of the four Directors making up the Audit Committee, three are considered

Independent Directors in accordance with the criteria set out in Capital Markets Rule 5.119.

The Audit Committee held seven meetings during 2023. In accordance with Capital Markets

Rule 5.117.2, three out of four members are considered independent in line with the criteria

set out in Capital Markets Rule 5.119. These are Godfrey Swain (replacing Gordon Cordina

as aforementioned), Antoinette Caruana and Martin Galea. The Audit Committee members

and relative attendance at meetings is listed below.

Godfrey Swain (Chairman, appointed on 28 April 2023) 3

Antoinette Caruana 7

Gordon Cordina (appointed until 28 April 2023) 3

Martin Galea 6

Jose Maria del Pozo 7

In accordance with Capital Markets Rule 5.118, the Board considers the four Audit

Committee members as having the required competence individually and jointly as a

Committee, due to their professional background and experience in the financial sector, as

well as in other sectors, including the insurance sector, at both national and international

level.

The CEO, the Chief Financial Officer and the Internal Auditor, amongst other members of

Management, attend the Audit Committee meetings by invitation. The Whistleblower

Reporting Officer reports to the Audit Committee as and when required. The external

auditors are invited to attend meetings of the Audit Committee and are entitled to convene a

meeting of the Committee if they consider that it is necessary. The Company Secretary also

acts as Secretary to the Audit Committee.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 8 – Committees - continued

Audit Committee - continued

The Chairperson of the Audit Committee reports to the Board at every Board meeting thus

ensuring good communication and continuity between the said Board Committee and the

other members of the Board.

Risk and Compliance Committee

The Board has responsibility for the Company's overall approach to strategic decision-

making and effective risk management (financial and non-financial including reputational).

Thus the Board exercises oversight of risk and how it is managed with appropriate

accountability to stakeholders.

The Risk and Compliance Committee has a two-fold function: it assists the Board in

overseeing the Company’s compliance with the obligations imposed by legislation, codes,

rules and regulations, relevant to the Company and its business; and it maintains oversight for

review and proper implementation of the Company’s Risk policies and assessing and

advising the Board on high-level risk-related matters, including the different types of Risk

which the Company and its subsidiaries may be exposed to from both a financial and non-

financial perspective.

To this end the Committee ensures that the Company’s strategy and risk appetite are aligned

and monitors the stress testing framework, governance and internal control structures.

Furthermore, the Committee approves the annual plan for the Compliance Function and is

updated at every meeting on progress in relation to the said plan and other matters referring

to regulatory compliance risk including the relationship with the Company’s Regulator.

The Money Laundering Reporting Officer, the Complaints Officer and the Anti-Fraud

Officer report directly to this Committee. The Money Laundering Reporting Officer and the

Compliance Officer of the subsidiary companies Bee Insurance Management Ltd. and

EuroMed Risk Solutions Ltd. also report to this Committee at every meeting.

The Risk and Compliance Committee held five meetings during 2023. The Committee

members and relative attendance to meetings is listed below.

Martin Galea (Chairman) 5

Diane Bugeja 4

Jose Maria del Pozo 5

Etienne Sciberras 5

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 8 – Committees - continued

Risk and Compliance Committee - continued

The CEO, the Chief Financial Officer, the Chief Compliance Officer and the Chief Risk

Officer, amongst others as may be required, attend the Committee meetings by invitation.

The Company Secretary also acts as Secretary to the Committee.

The Chairperson of the Risk and Compliance Committee reports to the Board at every Board

meeting thus ensuring good communication and continuity between the said Board

Committee and the other members of the Board.

Investment Committee

The Investment Committee is a joint Committee composed of Directors of the Company and

Directors of its subsidiary MAPFRE MSV Life p.l.c.. The Investment Committee oversees

the investment activities of the Company and its subsidiaries, executes its policies and

guidelines, scrutinises and approves material transactions and monitors results.

Although the Investment Committee meets on a monthly basis the business of the Company

was discussed at three meetings during 2023. The Committee members and relative

attendance to meetings is listed below.


Simon Azzopardi	3
Romeo Cutajar (Chairman)	3
Jose-Luis Jimenez	3
Jose Maria del Pozo	3
Javier Moreno	3
Patrick Spiteri Swain	3
Paul Testaferrata Moroni Viani	2

The CEO of the subsidiary MAPFRE MSV Life p.l.c., the Chief Financial Officer both of the

Company and of its subsidiary MAPFRE MSV Life p.l.c., the MAPFRE Regional Chief

Financial Officer, amongst others as may be required, attend the Committee meetings by

invitation. The Company Secretary of the subsidiary MAPFRE MSV Life p.l.c. acts as

Secretary to the Committee.

Remuneration Committee

The Board of Directors approves the remuneration of Directors and Chief Officers on the

recommendation of the Remuneration Committee. The maximum aggregate directors’

emoluments are established and approved by the shareholders during General Meetings as

and when required.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 8 – Committees - continued

Remuneration Committee - continued

Further detail on the various aspects of how the Company remunerates its employees, the

workings of this Committee and information relative to its’ meetings in 2023 are considered

in the Remuneration Statement and Report to the Shareholders.

The Remuneration Committee held three meetings during the period under review and the

attendance was as follows:


Jose Ramon Alegre (Chairman)	3
Antoinette Caruana	3
Gordon Cordina (appointed on 28 April 2023)	2
Robert Suban (appointed until 28 April 2023)	1

The CEO for MAPFRE Middlesea p.l.c., the CEO for MAPFRE MSV Life p.l.c., the Chief

Officer, Human Resources for MAPFRE Middlesea p.l.c., amongst others as may be

required, attend the Remuneration Committee meetings by invitation. The Company

Secretary also acts as Secretary to the Committee.

The 2023 Annual Report includes a separate Remuneration Statement in terms of Code

Provisions 8.A.3 and 8.A.4 and Remuneration Report in terms of Code Provision 12.26K.

Principle 9 – Relations with Shareholders and with the Market

The Company recognises the importance of maintaining a dialogue with its shareholders and

of keeping the market informed to ensure that its strategies, as well as performance, are well

understood. The Board is of the view that during the period under review the Company has

communicated effectively with the market through a number of company announcements and

press releases.

The Company also communicates with its shareholders through the Company’s Annual

General Meeting (‘AGM’) concerning which further detail is provided under the section

entitled General Meetings. The Chairman ensures that all relevant individuals including the

Chairpersons of the Board Committees are present at the AGM to answer any questions as

may arise.

Apart from the AGM, the Company communicates with its shareholders through the Annual

Report, as available for review and downloading from the Company’s website. The

Company’s website (www.mapfre.com.mt) also contains information about the Company and

its business, including the six-monthly financial statements and all issued company

announcements together with a section entirely dedicated to investor relations for the benefit

of all Shareholders and the general public.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 9 – Relations with Shareholders and with the Market - continued

Furthermore, the Chairman ensures that constant and consistent communication is maintained

with all stakeholders including the shareholders to discuss matters of significant importance

or to address particular issues or concerns. To this end, the Chairman and CEO maintain open

dialogue with the major shareholders and the Chairman, CEO and Company Secretary hold

an annual meeting with representatives of the Malta Association of Small Shareholders to

discuss various matters in the interests of the minority shareholders.

Individual shareholders can raise matters relating to their shareholding and the business of the

Company at any time throughout the year via the Office of the Company Secretary, a facility

which is well availed of and functions very well in practice. Shareholders are also given the

opportunity to ask questions at the AGM or submit written questions in advance and the

Company recognises their statutory right to request the convening of an extraordinary general

meeting in accordance with Article 52 of the Articles of Association of the Company and

Article 129 of the Companies Act (Cap. 386 of the Laws of Malta).

Principle 10 – Institutional Shareholders

The Company’s Institutional shareholders keep the market updated on issues related to their

respective companies through company announcements and press releases. During the year

under review, the Company issued various press releases related to the controlling

shareholder, namely MAPFRE S.A, in connection with the latter’s operations abroad. The

other institutional shareholder, namely Bank of Valletta plc, is a listed company on the Malta

Stock Exchange and consequently a steady flow of information is maintained through

company announcements and press releases. In addition, the six monthly and annual results

include a section on the insurance interests of institutional shareholders.

Principle 11 – Conflicts of Interest

The Directors are strongly aware of their responsibility to act in the interest of the Company

and its stakeholders including its shareholders at all times, irrespective of whom appointed

them to the Board, and of their obligation to avoid conflicts of interest. During the period

under review, the Board maintained its practice that in the event of a real or potential conflict

of interest arising in respect of a Director in connection with any transaction or other matter,

the interest is to be declared and the individual concerned shall refrain from taking part in

proceedings or decisions relating to the matter. The Board minutes would include a record of

such declarations and of the action taken by the individual director concerned as and when

required.

In accordance with the MAPFRE Corporate Governance Policy and the Policy for Managing

Conflicts of Interest, a Director is to avoid situations in which he could have a conflict of

interest, whether direct or indirect, actual or potential, with the interest of the Company and

shall ensure that personal interests of any nature do not take precedence over the interests of

the Company and its stakeholders.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

2. Compliance with the Code - continued

Principle 11 – Conflicts of Interest - continued

The Company also has an Internal Code of Conduct Relating to Listed Securities addressed

to all directors and selected officers of the Company and its Subsidiary undertakings. The

aim behind this Code is to ensure compliance with the Prevention of Market Abuse

Regulatory Framework as well as the recommendations and principles contained in the

Capital Markets Rules. The Company keeps a record of all advance notices received in

connection with permitted dealings by directors and selected officers and acknowledgements

of such advance notices. The Company reminds all Directors and senior officers of their

obligation to conform to the Code on an annual basis.

As required by principle 11.3 of Appendix 5.1 of the Capital Markets Rules a Directors’

beneficial interest in the share capital of the Company as at 31 December 2023 has been

declared by Paul Testaferrata Moroni Viani stemming from his indirect shareholding in the

Company’s shares through his shareholding in family businesses.

Principle 12 – Corporate Social Responsibility

During 2023, MAPFRE Malta once again met its CSR objectives collaborating with a

number of different entities to organize several activities, ranging from food and blood

donations, environmental activities and donations to various charitable organisations and

NGOs. Malta Community Chest Fund, Malta Trust Foundation, Majistral Park, Malta Red

Cross Foundation, Fondazzjoni Patrimonju Malti and Down Syndrome Association were

some of the beneficiaries of these donations to mention a few.

Fundación MAPFRE once again allocated over €160,000 for projects in Malta across

different areas including road safety awareness, health campaigns and social actions.

Moreover, the Foundation has collaborated with Caritas Malta, supporting an Adventure

Therapy Cycling Project, providing therapeutic outdoor activities for adolescents dealing

with substance abuse issues. Throughout 2023, Fundación MAPFRE also continued in their

efforts to generate awareness towards road safety measures by educating young adults and

the public in general on road safety measures. Besides its ongoing campaign in collaboration

with Malta Public Transport, Ministry of Education and the Road Safety Council, Fundación

MAPFRE teamed-up with Doctors for Road Safety (D4RS), who also share the same concern

on this important immediate national issue.

MAPFRE Malta also joined the fight against breast cancer with a variety of awareness-

raising activities through their #ThinkPink campaign, as well as by collaborating with the

Action for Breast Cancer Foundation as per previous years.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

3.Non-compliance with the code

Principle 3 – Composition of the Board

The Code recommends that the Board of Directors be composed of executive and non-

executive Directors, including independent non-executives. The Company’s Board, as

explained in Section 2 – Principle 3 of this Statement, is composed exclusively of non-

executive Directors. The appointment of Directors to the Board is a matter reserved

exclusively to the Company shareholders (except in the case of the filling of a casual

vacancy) and each Director retires from office at the AGM. Therefore, the composition of the

Board of Directors is determined by the shareholders during the AGM. Moreover the CEO of

the Company attends and reports during all meetings of the Board and various Senior

Managers attend by invitation to report on salient matters thereby ensuring a constant and

effective flow of information between the Company’s Management and Board of Directors.

Principle 4 – The Responsibilities of the Board

Code Provision 4.2.7 recommends: “the development of a succession policy for the future

composition of the Board of Directors and particularly the executive component thereof, for

which the Chairman should hold key responsibility”.

Regard being had to the non-executive role of the Company’s Directors and in view of the

facts explained above, particularly that the appointment of Directors is a matter reserved

exclusively to the Company’s shareholders and that every director retires from office at the

Annual General Meeting, the Company has not felt the necessity to date to formalise a

succession policy for the Board of Directors. That said, the Company and its Board remain

mindful of the recommendation and this view would potentially be re-visited in the event of a

change in Board composition or other circumstances.

Principle 7 – Evaluation of the Board’s Performance

Code Provision 7.1 recommends: “the Board should appoint a committee chaired by a non-

executive Director in order to carry out a performance evaluation of its role”.

As explained above the Board has not appointed a specific committee to carry out a

performance evaluation but has rather opted to have an annual performance evaluation

exercise carried out under the auspices of the internal Compliance Area through the

compilation of a Board Effectiveness Questionnaire by each individual Director.

The questionnaire is particularly robust and is structured into eight sections with a total of 63

statements covering several aspects of Board membership including the understanding of the

workings of the Board and its Committees, the Company’s products and services, distribution

channels, strategy and risk, as well as governance, training requirements, subsidiaries and

contingent liabilities. Directors are also invited to elaborate further on any of the statements

at the end of the questionnaire.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

3.Non-compliance with the code - continued

Principle 7 – Evaluation of the Board’s Performance - continued

An objective and independent report as to the overall outcome of the findings is then drawn

up by the Compliance Area and shared with the Chairman to co-ordinate further individual or

group discussion with the Directors based on the replies. In 2023 a group discussion of the

final report was facilitated by a specific off-site meeting presided over by the Chairman and

recommendations were noted for implementation by the Company Secretary.

For these reasons the process is deemed to be comprehensive and sufficient to meet the

intended aims.

Principle 8A – Remuneration Committee: Code Provision 8.A.1

Code Provision 8.A.1 recommends that the Board of Directors: “should establish a

Remuneration Committee composed of non-executive Directors with no personal financial

interest other than as shareholders in the Company, one of whom shall be independent and

shall chair the Committee”.

As detailed further in the Directors' Remuneration Report, up until 28 April 2023, the

Remuneration Committee was composed of Jose Ramon Alegre (Chairman and Non-

Independent Director), Antoinette Caruana and Robert Suban. The composition saw a

reshuffle relative to the previous year and was once again re-composed at the AGM held on

the 28 April 2023 to comprise Jose Ramon Alegre as Chairman, Antoinette Caruana and

Gordon Cordina. This to continue to foster open dialogue and to ensure that all shareholders

are represented contributing to independence and objectivity in the functioning of the

Committee.

Although the Director holding the Chair of the Committee was not an independent non-

executive Director as recommended, Committee decisions are reached on the basis of the

consensus of all members present. This fact, coupled with open discussion, ensures that final

decisions taken are not swayed in any way by the Director holding the Chair.

Moreover, Committee document packs are circulated to all Members well in advance of the

meeting allowing all Members ample opportunity to informally discuss any matters in

anticipation of the Meeting and / or to represent their views.

Principle 8B – Nomination Committee

Pursuant to the Company’s Articles of Association and as aforementioned the appointment of

Directors to the Board is reserved exclusively to the Company’s shareholders, in line with the

general commercial practice in Malta. Shareholders holding 11% or more of the issued

shares are entitled to appoint one director for every 11% holding, whilst the other

shareholders are entitled to appoint the remaining Board members at the Annual General

Meeting in accordance with the provisions of the Articles of Association.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

3.Non-compliance with the code - continued

Principle 8B – Nomination Committee - continued

Thus the Company considers that the procedure is already sufficiently defined and the

requirements of transparency are also well-met without the need for the establishment of a

formal Nomination Committee.

Principle 9 – Relations with Shareholders and with the Market

Code Provision 9.3 recommends the Company having a mechanism in place to resolve

conflicts between minority shareholders and controlling shareholders.

The Board is mindful of its duty to act in the interest of all stakeholders, independent of

whom appoints them and the balance between the interests of all shareholders is of

paramount consideration at all times. To this end the Board seeks to make available a fair,

balanced and understandable assessment of the Company's position and prospects, publish all

relevant information on its web site and ensures there are channels to receive feedback from

stakeholders including shareholders.

To this end, although the Company does not have a specific mechanism in place there is open

dialogue between Management and all the non-Executive Directors of the Company. The

Company also ensures a good relationship with the Malta Association for Small Shareholders

maintaining an open-door policy with them, as well as with any individual shareholders who

may be interested in making direct submissions to the Company, through the Office of the

Company Secretary.

In light of this, and as the Company is mindful of the protection granted to minority

shareholders in terms of the Companies Act (Cap. 386 of the Laws of Malta) by which it

would necessarily be bound to abide, the Company is of the opinion that no formal

procedures to resolve conflict between minority and controlling shareholders are necessary at

this stage.

Internal Control and Risk Management System

This information is being provided in terms of Capital Markets Rule 5.97.4.

While authority to manage the daily business of the Company is delegated to the CEO within

the limits set by the Board, the Board is ultimately responsible for the Company’s internal

control systems and for ensuring their effectiveness. Such systems are designed to manage,

rather than eliminate, the risks associated with achieving business objectives and can only

provide reasonable (as opposed to absolute) assurance against material misstatement or loss.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

3.Non-compliance with the code - continued

Internal Control and Risk Management System - continued

The Company manages its internal risk through the ‘three lines of defence’ approach,

ensuring achievement of commercial aims while continuing to meet all legal and regulator

requirements. These then feed into the Board through the Audit Committee and the Risk and

Compliance Committee in order for the Board to maintain oversight of the processes and

procedures ensuring the effectiveness of the systems of internal control.

The key features of the Company’s systems of internal control are as follows:

Organisation - The Company has clear reporting lines from the Boards of Directors of

subsidiary and associated companies. The MMS Chairman is also kept informed as to the

operations of the subsidiary companies either by sitting directly on the respective Boards or

through the other Company Directors and Senior Management who sit on the Company and

subsidiary boards, Management and Operational Committees.

Risk Identification - The respective Management of each of the Group companies is

responsible for the identification and evaluation of key risks applicable to their areas of

business. The Board reviews its Risk Management policies and strategies and oversees their

implementation to ensure that identified key risks are properly assessed and managed. The

risk based nature of the Solvency II regime requires the company to have an effective risk

management system in place to identify, measure, manage, monitor and report on the main

risks which could impact the entity. This process is embodied in the annual ORSA (Own

Risk and Solvency Assessment) process. Expert judgements, stress testing and sensitivity

analysis are important elements in the Company’s risk identification framework embedded in

the ORSA process. The ORSA report is submitted to the competent Authority on an annual

basis after approval of the Risk and Compliance Committee and ultimately of the Board of

Directors.

Reporting - Functional, operating and financial reporting standards are applicable to all

entities of the Group. Systems and procedures are in place to identify, control and report on

the major risks. The Board receives periodic management information giving comprehensive

analysis of financial and business performance including variances against budgets.

General Meetings

This information is being provided in terms of Capital Markets Rule 5.97.6.

The General Meeting is the Company’s most supreme decision-making organ and its

functions are governed by, and conducted in accordance with, the Company’s Articles of

Association. The General Meeting is called with not less than twenty-one days’ notice in

writing. In addition to any matters which are deemed to constitute ’special business’, the

annual general meeting deals with matters of a recurring nature namely, the declaration of a

dividend, the consideration of the accounts, statement of financial position and reports of the

directors and

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Corporate Governance Statement - continued

General Meetings - continued

auditors, the election of directors, the appointment of the auditors and the authorisation of the

directors to set their remuneration. The Memorandum and Articles of the Company may be

amended by means of an extraordinary resolution (as defined in the Articles) of the Company

during general meetings.

The Board of Directors is responsible for developing the agenda for the AGM and sending it

to the shareholders.

Shareholders’ rights can be exercised in accordance with the Articles of the Company, the

Companies Act and the Capital Markets Rules. Accordingly, all shareholders registered in the

Shareholders’ Register on the Record Date as defined in the Capital Markets Rules, have the

right to attend, participate and vote in the general meeting. A shareholder or shareholders

holding not less than 5% of the nominal value of all the shares entitled to vote at the General

Meeting may request the Company to include items on the agenda of a General Meeting and /

or table draft resolutions for items included in the agenda of a general meeting. Such requests

are to be received by the Company at least forty-six days before the date set for the relative

General Meeting.

A shareholder who cannot participate in the General Meeting can appoint a proxy by written

or electronic notification to the Company. Every shareholder represented in person or by

proxy is entitled to ask questions which are pertinent and related to items on the agenda of the

General Meeting and to have such questions answered by the Directors or such persons as the

Directors may delegate for that purpose.

In accordance with the declaration made in the Corporate Governance Statement for

Financial Year 2022, in 2023 the Company reverted to hosting a physical AGM to enable

active participation by all those having an interest in doing so and to allow the shareholders

proper opportunity to engage with the Company Directors and members of Management.

After an absence of two years, a physical AGM was again held on 28 April 2023.

Signed by Martin Galea (Chairman) and Antoinette Caruana (Director) on the 25 March

2024.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders

1. Terms of Reference and Membership

In accordance with Section 8A of The Code of Principles of Good Corporate Governance

(Appendix 5.1 of the Capital Markets Rules under Chapter 5 on Continuing Obligations), the

Remuneration Committee ('the Committee') of MAPFRE Middlesea p.l.c. ('MMS' or 'the

Company') hereby submits its Remuneration Statement and Report to the shareholders of

MMS.

The Committee’s main task, in accordance with its Terms of Reference, is to ensure that the

MMS Remuneration Policy is implemented and to propose appropriate remuneration

packages for Directors and Chief Officers in accordance therewith. The Remuneration

Committee also monitors the level and structure of the remuneration packages for Directors

and Chief Officers based on the information presented by Management from time to time.

As at 1 January 2023, the Committee Members were Jose Ramon Alegre (Chairman),

Antoinette Caruana and Robert Suban. Robert Suban did not submit his nomination to the

Board of Directors for re-election at the Company's Annual General Meeting ("AGM") held

on the 28 April 2023, and thus, at the Board meeting held directly after the AGM, Jose

Ramon Alegre, Antoinette Caruana and Gordon Cordina were appointed as the members of

the Remuneration Committee. Jose Ramon Alegre was once again appointed Chairman.

All the Committee Members are non-Executive Directors of MMS with no personal financial

interest as recommended by Code provision 8.A.1. The MMS President & CEO, Javier

Moreno, the MAPFRE MSV Life p.l.c (MMSV) CEO, Etienne Sciberras and other members

of senior management, including Ines Silva in her capacity as Chief Officer Human

Resources for both companies, were invited to attend the Committee meetings held

throughout the year as and when required. The Company Secretary, Dr Daphne Sims

Dodebier, acted as the Secretary to the Committee.

Code provision 8.A.1 recommends that an independent non-Executive Director chair the

Committee. The Committee takes decisions by the unanimous agreement of its Members.

Therefore, even though the Committee is not chaired by an independent non-Executive

Director (the aforementioned Jose Ramon Alegre being a non-Executive but non-Independent

Director), the Chair's vote does not sway the decisions taken by the Committee consequent to

the open and transparent discussions.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

2. Meetings

The Remuneration Committee held three meetings during the period under review and the

attendance was as follows:

MemberAttended

Jose Ramon Alegre (Chairman) 3

Antoinette Caruana 3

Gordon Cordina (Member as from 28 April 2023) 2

Robert Suban (Member until 28 April 2023) 1

The Committee determined and/or discussed the following matters:

• Senior Management Appointments:

• HR Reports;

• Proposed Performance Bonus Pay-Out for FY2022 & Salary increase for 2023;

• Amendments to the Remuneration (Compensation) Policy;

• 2023 Management by Objectives Variable remuneration framework;

• Collective Agreement Amendments:

• Succession Planning

• Outcome of the eNPS 2023 employee Survey

• MAPFRE Malta Mental Health & Well-being Strategy

• Remuneration Statement for the Annual Report

3. Remuneration Statement

a. Remuneration Policy - Senior Management

The MMS Remuneration (also sometimes referred to as Compensation) Policy framework is

set by the Board of Directors acting through the Remuneration Committee. It is based on the

guidelines and principles contained within the MAPFRE Group Compensation Policy which

was most recently approved by the majority of shareholders during the MAPFRE Middlesea

p.l.c Annual General Meeting held on 28 April 2023.

The Committee reviews and approves the individual remuneration arrangements for Senior

Management, namely, the President & CEO, the Chief Financial Officer, the Company

Secretary, the Chief Officers and the Internal Auditor.

The Committee has access to both internal and independent external advice on remuneration

matters as and when required.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

a. Remuneration Policy – Senior Management - continued

The Committee deems the current Senior Management remuneration packages to be in line

with the local market equivalents and holds them to be fair, reasonable and commensurate to

the responsibilities involved. The Committee also believes that the remuneration packages

are such as to enable the Company to attract, retain and motivate employees having the

appropriate skills and qualities to ensure the proper management of the organisation.

There have been no significant changes to the Company’s Remuneration Policy for Senior

Management during the financial year under review. The Pension Scheme implemented in

the second half of Financial Year 2022 continues and completed a full year in 2023.

As previously explained, the Pension Scheme is voluntary and intended to provide employees

with an opportunity to build up their retirement savings during their employment. All

employees of the Company, including Senior Management, but excluding Directors, are

eligible to be enrolled in the Pension Scheme, provided that they have been in employment

with the Company for at least two years. Those employees who opt to participate in the

Pension Scheme, determine their own monthly contribution between the minimum and

maximum amounts established by the Pension Scheme’s Terms and Conditions. In return, the

Company then makes contributions into the accounts of these employees who would have

opted to participate in the Pension Scheme and contributes twice the amount contributed by

the employee subject to a maximum based on duration of service, which is also established in

the Pension Scheme’s Terms and Conditions. Please refer to Note 11 in the Financial

Statements below for further information with regard to the contribution made by the

Company for Financial Year 2023 relative to the said Scheme.

The performance appraisal system underpinning the Company’s remuneration structure as

implemented in 2013 and the performance bonus scheme implemented in 2014 also

continued to apply in 2023, with the latter being reviewed and further enhanced as necessary

on an annual basis.

The said performance bonus scheme is still based on the achievement of Group, Company

and Departmental objectives and was further enhanced in 2019 to give some weight to the

adherence to Corporate Values. In Financial Year 2020 the performance appraisal system was

upgraded to a new tool which allows for the generation of 360 degree feedback between

peers and internal clients and continuous communication between employees and their direct

managers throughout the year making the performance evaluation a lot more holistic.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

a. Remuneration Policy – Senior Management - continued

The terms and conditions of employment for Senior Management are set out in their

respective contracts of employment. In principle, these contracts do not contain provisions

for termination payments or other amounts linked to early termination nor have there been

any cases of early termination in practice. Share options, pension benefits and profit sharing

are not part of the MMS Remuneration Policy for Senior Management. Indeed Senior

Management, is not entitled to any compensation of a variable nature except the performance

bonuses set out hereunder.

The MMS President & CEO is eligible for an annual bonus entitlement calculated with

reference to the attainment of pre-established objectives and targets as recommended by the

Remuneration Committee and approved by the Board of Directors.

Insofar as the performance bonus for Senior Management as aforementioned, this is

calculated in accordance with the percentage achievement of the Group and Departmental

objectives referred to above. The performance bonus is inter alia approved by the

Remuneration Committee and determined in accordance with the performance appraisal

process. No supplementary pension or other pension benefits are payable to Senior

Management. Additionally, in 2022, a right of clawback was introduced in the Remuneration

Policy for Key Staff where, if the relevant Variable Remuneration attains one of two

quantitative criteria, 30% of the applicable Variable Remuneration would be deferred.

Both in the case of the MMS President & CEO and for Senior Management, the

Remuneration Committee is of the view that the proportion of fixed remuneration to

performance bonus is also reasonable and appropriate.

Non-cash benefits to which Senior Management are entitled include the use of a company car

and health insurance. The death-in-service benefit also forms part of the non-cash benefits

and the same terms are applicable to all other Company employees.

Total emoluments received by Senior Management during Financial Year 2023 are deemed

to be of a commercially sensitive nature and are thus not being disclosed in this Report in line

with Code Provision 8.A.6.

b. Remuneration Policy – Directors

As at 31 December 2023, the Board of Directors of MAPFRE Middlesea p.l.c. was composed

of nine non-Executive directors. Three Directors, namely Jose Ramon Alegre, Jose-Luis

Jimenez and Jose Maria del Pozo, did not receive a fee in accordance with the established

policy of the MAPFRE Group with which they are employed and which appointed them.

Etienne Sciberras also did not receive a fee since during Financial Year 2023 he occupied the

position of Chief Executive Officer of MAPFRE MSV Life p.l.c. (a subsidiary of MMS).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the shareholders - continued

3. Remuneration Statement - continued

b. Remuneration Policy – Directors - continued

Based on the recommendations of the Committee, the current Directors’ fees, for each

Director as applicable, and as approved by the Board are as follows:

Directors’ Fees including Board Committees as applicable

Chairman€60,000 per annum (2022: €60,000)

Other Directors (per Director)€40,000 per annum (2022: €40,000)

Audit Committee Fees

Chairman€7,000 per annum (2022: €7,000)

Member (per member)€5,000 per annum (2022: €5,000)

Subsidiary Fees

Chairman€7,000 per annum (2022: €7,000)

Member (per member)€5,000 per annum (2022: €5,000)

None of the Company’s Directors had any service contracts with either the Company or any

of its subsidiaries as at the end of the Financial Year.

Directors’ emoluments are established to reflect the responsibility and time committed by

Directors to the affairs of the Company, including the Board Committees of which a Director

may be a member save for the Audit Committee that is additionally remunerated as detailed

above. None of the Directors, in their capacity as Director of the Company and/or Committee

members, are entitled to profit sharing, share options, pension benefits, participation in the

Employee Pension Scheme or any other remuneration.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

c.Code Provision 8.A.5

Directors' Emoluments 2023


Fixed Remuneration	Variable Remuneration	Share Options	Others
€264,083	None	None	None

Fees payable to directors in respect of 2023 amounted in total to €264,083 (2022: €307,350).

The emoluments of Senior Management are not being disclosed in line with Code Provision

8.A.6 since these are deemed to be of a commercially sensitive nature. This decision will

continue to be reviewed on an annual basis.

d.Code Provision 12.26K

In addition to the information provided above and with reference to Appendix 12.1 of the

Capital Markets Rules it is noted that the maximum annual aggregate emoluments that may

be paid to the Directors are approved by the shareholders in the General Meeting in terms of

Article 81 of the Company’s Articles of Association. This amount was established by the

Board of Directors after consultation with the MAPFRE Group and based on the guidelines

as set forth in the Compensation Policy relative to the fixing of compensation for the non-

Executive members of the governance bodies having regard to the Company’s financial

situation, profitability and sustainability. The maximum annual aggregate amount was then

confirmed in the total sum of €350,000 per annum at the forty-second Annual General

Meeting held on the 28 April 2023, which has remained consistent since 2018.

The amount paid to each Director by the Company for attendance at meetings of the Board or

of the Board Committees, when due as explained above, is not tied to the Company’s

performance or other performance criteria but is a pre-determined, fixed annual amount as

indicated below:

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

d.Code Provision 12.26K - continued


Director	2023 Fees €	2022 Fees €	Percentage Annual Change of Remuneration %
			2022-2023	2021-2022	2020-2021
Jose Ramon Alegre (NED)	nil	nil	n/a	n/a	n/a
Antoinette Caruana (NED)	45,000	45,000	0.00	4.65	0.00
John Cassar White (NED until 29 April 2022)	nil	13,333	n/a	(55.56)	n/a
Gordon Cordina (NED from 29 April 2022)1	52,333	54,683	0.00	n/a	n/a
Jose Maria del Pozo (NED)	nil	nil	n/a	n/a	n/a
Martin Galea (NED)2	65,000	68,000	(10.55)	4.81	1.96
Jose Luis Jimenez (NED)	nil	nil	n/a	n/a	n/a
Taddeo Scerri (NED until 29 April 2022)	nil	15,000	n/a	4.65	5.00
Etienne Sciberras (NED from 29 April 2022)5	nil	nil	n/a	n/a	n/a
Robert Suban (NED from 29 April 2022 until 28 April 2023)	13,333	26,667	0.00	n/a	n/a
Godfrey Swain (NED from 28 April 2023)	48,417	nil	n/a	n/a	n/a
Paul Testaferrata Moroni Viani (NED)	40,000	40,000	0.00	0.00	(6.98)
Joseph F.X. Zahra (NED until 29 April 2022)4	nil	44,667	n/a	17.50	0.00
Total	264,083	307,350

1The amount includes €50,000 paid to Dr Gordon Cordina as Chairman of the subsidiary

Board. In 2022, from the whole amount €22,349 was paid to Bank of Valletta p.l.c. as Dr

Cordina’s employer based on a separate agreement for services rendered.

2The amount includes €2,333 paid to Martin Galea in 2022 for the position as Chairman of

the subsidiary’s Audit Committee.

3Total emoluments for 2023 paid to Mr Etienne Scbiberras as CEO of MAPFRE MSV Life

amounted to €239,530 (2022: €211,444).

4The amount includes €31,333 paid to Joseph F X Zahra for the position as Director of the

subsidiary's Board and Chairman of the subsidiary's Audit Commitee as from 30 April 2022.

* Percentage annual change of remuneration were based on annualised remuneration for

two years being compared to allow for a meaningful comparison.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

d.Code Provision 12.26K - continued

Remuneration paid to Directors as shown in the above table are all fixed in nature and thus

the ratio of fixed and variable remuneration was 100%-0% for both years being reported. The

changes in the total remuneration of Non-Executive Directors is to be considered with the

information included in the table, further down in this report, showing a comparison between

the percentage annual change of remuneration of President & CEO against company

performance metrics and percentage annual change of the Company’s employees’ average

remuneration employed on a full-time basis equivalent.

None of the Directors and Members of the Board Committees held any service contracts with

the Company or any of its subsidiary undertakings and no Director is entitled to share

options, profit sharing, pension benefits or any other type of emoluments save for the

provision of cover under a Group Life scheme. It is also confirmed that no other fees were

payable or paid to any of the Directors or Committee Members during the financial year

under review.

By reference to Capital Markets Rule 12.2A no other person is deemed to be in charge of the

operations or the activities of the Company, and thus fall within the definition of director,

beyond the members of the Board and the Chief Executive Officer.

In this respect and relative to Appendix 12.1 the total emoluments paid by the Company to

the Chief Executive Officer in office during Financial Year 2023 were as follows:


	Financial Year
	2023	2022	2021
	€	€	€
President & CEO
Javier Moreno Gonzalez

Fixed Salary	191,880	184,500	135,000
Defined pension contribution	58,601	41,985	30,375
Other fringe benefits	102,551	106,644	84,262


Total Fixed remuneration	353,032	333,129	249,637

Variable remuneration	135,674	116,320	97,817


Total remuneration	488,706	449,449	347,454


Fixed Variable Proportion	72%-28%	74%-26%	72%-28%

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

d.Code Provision 12.26K - continued

In respect of Variable Remuneration, deferred or otherwise, paid or pending payment, a

partial or total reduction is possible if particular circumstances arise including in the event of

a restatement of annual accounts other than resulting from a change in legislation and in the

event of fraud. No such occurrence took place in 2023.

Variable remuneration for the President & CEO is based on Global, Regional and Country

results together with Country premium written targets, with the highest weighting given to

the Country results and premiums respectively. The main objective of the Group is profitable

Growth and the targets are aligned with such objectives. As part of a Global Group it is

expected that as a Country we contribute towards the profitability of both the Region and the

Global Group results and accordingly part of the variable remuneration is attached to the

achievement of the higher Group results. The achievement percentage follows a set scale

going from complete non-achievement, to pro-rata if not fully achieved, to accelerated

achievement if targets are exceeded. These scales are in line with the Remuneration Policy

and approved accordingly by the Remuneration Committee.

In terms of the requirements within Appendix 12.1 of the Capital Markets Rules, the

following table presents the annual change of remuneration of the President & CEO, of the

Company’s performance, and of average remuneration on a full-time equivalent basis of the

Company’s employees over the two most recent financial years:


Performance indicators	% Difference FY2023-FY2022	% Difference FY2022-FY2021	% Difference FY2021-FY2020

Company's profit after tax	59.86%*	45.3%**	(36.64)%
Company's gross premium written	9.88%	8.75%	6.64%
Remuneration of Company's President & CEO	8.73%	(2.98)%***	1.90%
Company's employees' average remuneration on full time equivalent	1.34%	3.39%	6.44%
Group's employees' average remuneration on full time equivalent	2.90%	3.01%	5.54%

* The increase arose mainly from 2023 being favourably impacted by an improved technical

result, lower Motor claims frequency and higher favourable claims run-off together with an

uplift from fair value gains on Equities and Property compared to losses in 2022.

** The increase arose mainly from 2022 being favourably impacted by the receipt of a net

€1.00 million in dividend from MAPFRE MSV Life p.l.c. and a €0.54 million recovery of an

amount previously impaired in relation to Progress Assicurazioni S.p.A. The percentage is in

line with prior year financial statements prior to IFRS 17 implementation.

*** For comparison purpose, since Javier Moreno Gonzalez's appointment began on 1 April

2021, his 2021 remuneration has been annualised.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Remuneration Statement and Report of the Remuneration Committee to

the Shareholders - continued

3. Remuneration Statement - continued

d.Code Provision 12.26K - continued

In terms of the requirements within Appendix 12.1 (f) there has been no deviation from the

procedure for the implementation of the remuneration policy as defined in Chapter 12 of the

Capital Markets Rules.

As required by provision 12.26N of the Capital Markets Rules the Company’s auditors have

verified that the information that needs to be included in the Remuneration Report as per

Chapter 12 and Appendix 12.1 of the Capital Markets Rules, has been included.

Signed by Antoinette Caruana (Director and Remuneration Committee Member) on 25

March 2024.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of profit or loss


		Year ended 31 December


		Group		Company

		2023	2022	2023	2022
			Restated		Restated
	Notes	€’000	€’000	€’000	€’000

Insurance revenue	7	140,580	131,408	92,869	84,350
Insurance service expenses	7	(91,444)	(98,556)	(68,455)	(72,683)
Net expenses from reinsurance contracts held	7	(15,844)	(7,872)	(12,247)	(5,727)


Insurance service result	7	33,292	24,980	12,167	5,940


Interest revenue calculated using the effective interest method		5,222	1,501	221	74
Other investment revenue/(losses)		176,758	(296,719)	1,742	1,019
Net credit impairment losses		(22)	—	—	—


Net investment return/ (loss)	8	181,958	(295,218)	1,963	1,093


Net change in investment contract liabilities	8	(8,194)	10,353	—	—

Finance (expense)/income from insurance contracts issued	8	(176,871)	264,695	(1,320)	2,604
Finance (expense)/income from reinsurance contracts held	8	(2,227)	5,935	486	(1,059)


Net financial result		(187,292)	280,983	(834)	1,545



Net insurance and investment results		27,958	10,745	13,296	8,578
Other income	9	1,903	1,373	—	—
Other operating expenses		(5,842)	(4,366)	(3,432)	(2,522)
Recovery of impairment in group undertaking		—	540	—	540


Profit before tax		24,019	8,292	9,864	6,596

Tax expense	12	(8,076)	(2,677)	(3,176)	(2,413)


Profit for the year		15,943	5,615	6,688	4,183



Attributable to:
- owners of the Company		11,309	4,476	6,688	4,183
- non-controlling interests		4,634	1,139	—	—


		15,943	5,615	6,688	4,183

The Notes on pages 55 to 237 are an integral part of these financial statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023


Statement of profit or loss and other comprehensive income
		Year ended 31 December
		Group		Company
		2023	2022	2023	2022
			Restated		Restated
	Notes	€’000	€’000	€’000	€’000

Profit for the financial year		15,943	5,615	6,688	4,183

Other comprehensive income:
Items that are or may be reclassified subsequently to profit or loss
Change in fair value of available-for sale investments	29	—	(770)	—	(764)
Net gains on investments in debt securities measured at FVOCI	29	273	—	287	—
Debt securities measured at FVOCI reclassified to profit or loss on disposal	29	14	—	14	—

Items that will not be reclassified to profit or loss
Re-measurement actuarial (loss)/gain on provision for other liabilities and charges		(68)	57	(68)	57


Total other comprehensive income, net of tax		219	(713)	233	(707)





Total comprehensive income for the year		16,162	4,902	6,921	3,476



Attributable to:
- owners of the Company		11,528	3,763
- non-controlling interests		4,634	1,139



Total comprehensive income for the year		16,162	4,902

Items disclosed in the statement above are disclosed net of tax.

The Notes on pages 55 to 237 are an integral part of these financial statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of financial position



	Notes	Group			Company
		As at 31 December		1 January	As at 31 December		1 January
		2023	2022	2022	2023	2022	2022
			Restated	Restated		Restated	Restated
		€’000	€’000	€’000	€’000	€’000	€’000
ASSETS
Intangible assets	16	30,732	28,149	22,625	10,391	9,967	9,146
Property and equipment	18	17,183	17,626	17,657	4,209	4,480	4,542
Right-of-use assets	17	1,601	1,461	1,802	1,509	1,378	1,685
Investment properties	19	105,619	108,278	110,016	13,809	13,404	13,529
Investment in associated undertakings	21	23,923	23,027	22,831	403	389	383
Investment in subsidiary undertakings	20	—	—	—	77,214	77,214	77,214
Other investments	22	2,136,313	1,983,770	2,413,876	16,290	12,097	8,382
Deferred income tax asset	23	2,118	8,750	2,313	1,260	1,292	1,268
Insurance contract assets	24	8,945	8,400	17,986	—	—	—
Reinsurance contract assets	24	13,359	23,590	25,959	13,359	23,590	25,959
Trade and other receivables	26	25,490	29,968	28,489	21,189	18,918	18,297
Current income tax receivable		7	42	308	—	—	—
Cash and cash equivalents	27	47,975	137,286	71,443	10,780	11,130	11,575


Total assets		2,413,265	2,370,347	2,735,305	170,413	173,859	171,980


EQUITY
Capital and reserves attributable to owners of the Company
Share capital	28	19,320	19,320	19,320	19,320	19,320	19,320
Share premium account		688	688	688	688	688	688
Other reserves	29	637	269	1,264	34,553	34,171	34,935
Retained earnings		67,524	59,945	57,587	27,108	24,106	22,266


		88,169	80,222	78,859	81,669	78,285	77,209
Non-Controlling Interest		82,694	78,103	77,964	—	—	—


Total equity		170,863	158,325	156,823	81,669	78,285	77,209



LIABILITIES
Deferred income tax liabilities	23	14,079	18,788	54,426	2,447	2,936	2,418
Provisions for other liabilities and charges	30	923	854	997	923	854	997
Insurance contract liabilities	24	2,063,844	2,050,773	2,405,572	72,467	82,964	82,070
Investment contract liabilities	25	123,253	69,054	75,922	—	—	—
Reinsurance contracts liabilities	24	15,493	10,750	19,971	—	—	—
Derivative financial instruments		—	—	775	—	—	—
Lease liabilities		1,661	1,530	1,866	1,575	1,449	1,745
Other payables	31	19,349	17,703	18,115	9,314	7,288	7,402
Current income tax liabilities		3,800	42,570	838	2,018	83	139


Total Liabilities		2,242,402	2,212,022	2,578,482	88,744	95,574	94,771


Total equity and liabilities		2,413,265	2,370,347	2,735,305	170,413	173,859	171,980

The Notes are an integral part of these financial statements.

These financial statements on pages 47 to 237 were approved by the Board of Directors and

authorised for issue on 25 March 2024 and signed on its behalf by Martin Galea (Chairman) and

Godfrey Swain (Director) as per the Directors' Declaration on ESEF Annual Financial report

submitted in conjunction with the Annual Report 2023.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of changes in equity


Group
		Attributable to owners of the Company


		Share capital	Share premium account	Other reserves	Retained earnings	Total	Non- controlling interests	Total equity
	Notes	€’000	€’000	€’000	€’000	€’000	€’000	€’000

Balance as at 1 January 2022 as previously stated		19,320	688	44,817	46,211	111,036	110,932	221,968
Adjustment on initial application of IFRS 17 net of tax		—	—	(43,553)	11,376	(32,177)	(32,968)	(65,145)


Balance as at 1 January 2022 as restated		19,320	688	1,264	57,587	78,859	77,964	156,823



Comprehensive income
Profit for the financial year		—	—	—	4,476	4,476	1,139	5,615

Other comprehensive income:
Change in available-for-sale investments' fair value at FVOCI	29	—	—	(770)	—	(770)	—	(770)
Revaluation gain on freehold land and buildings reclassified to retained earnings	29	—	—	(225)	225	—	—	—
Re-measurement actuarial gain on provision for other liabilities and charges		—	—	—	57	57	—	57


Total other comprehensive income, net of tax		—	—	(995)	282	(713)	—	(713)


Total comprehensive income		—	—	(995)	4,758	3,763	1,139	4,902



Transactions with owners

Dividends for 2021		—	—	—	(2,400)	(2,400)	(1,000)	(3,400)


Total transactions with owners		—	—	—	(2,400)	(2,400)	(1,000)	(3,400)


Balance as at 31 December 2022		19,320	688	269	59,945	80,222	78,103	158,325

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of changes in equity - continued


Group - continued
		Attributable to owners of the Company


		Share capital	Share premium account	Other reserves	Retained earnings	Total	Non- controlling interests	Total equity
	Notes	€’000	€’000	€’000	€’000	€’000	€’000	€’000

Balance as at 1 January 2023		19,320	688	269	59,945	80,222	78,103	158,325
Adjustment on initial application of IFRS9 net of tax		—	—	81	(162)	(81)	(43)	(124)


Balance as at 1 January 2023 as restated		19,320	688	350	59,783	80,141	78,060	158,201



Comprehensive income
Profit for the year		—	—	—	11,309	11,309	4,634	15,943

Other comprehensive income:
Net change in fair value of debt securities measured at FVOCI	29	—	—	273	—	273	—	273
FVOCI investments - reclassified to profit or loss	29	—	—	14	—	14	—	14
Re-measurement actuarial loss on provision for other liabilities and charges		—	—	—	(68)	(68)	—	(68)


Total other comprehensive income, net of tax		—	—	287	(68)	219	—	219


Total comprehensive income		—	—	287	11,241	11,528	4,634	16,162


Transactions with owners
Dividends for 2022		—	—	—	(3,500)	(3,500)	—	(3,500)


Total transactions with owners		—	—	—	(3,500)	(3,500)	—	(3,500)


Balance as at 31 December 2023		19,320	688	637	67,524	88,169	82,694	170,863

The Notes on pages 55 to 237 are an integral part of these financial statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of changes in equity - continued


Company
			Share
		Share	premium	Other	Retained
		capital	account	reserves	earnings	Total
	Notes	€’000	€’000	€’000	€’000	€’000

Balance as at 1 January 2022 as previously stated		19,320	688	34,935	21,468	76,411
Adjustment on initial application of IFRS17 net of tax		—	—	—	798	798


Balance as at 1 January 2022 as restated		19,320	688	34,935	22,266	77,209



Comprehensive income
Profit for the financial year		—	—	—	4,183	4,183

Other comprehensive income:
Change in available-for-sale investments' fair values	29	—	—	(764)	—	(764)
Re-measurement actuarial gain on provision for other liabilities and charges		—	—	—	57	57


Total other comprehensive income, net of tax		—	—	(764)	57	(707)


Total comprehensive income		—	—	(764)	4,240	3,476



Transactions with owners
Dividend for 2021		—	—	—	(2,400)	(2,400)


Balance as at 31 December 2022		19,320	688	34,171	24,106	78,285

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of changes in equity - continued


Company - continued
			Share
		Share	premium	Other	Retained
		capital	account	reserves	earnings	Total
	Notes	€’000	€’000	€’000	€’000	€’000

Balance as at 1 January 2023		19,320	688	34,171	24,106	78,285
Adjustment on initial application of IFRS 9, net of tax		—	—	81	(118)	(37)


Balance as at 1 January 2023		19,320	688	34,252	23,988	78,248



Comprehensive income
Profit for the financial year		—	—	—	6,688	6,688

Other comprehensive income:
Net change in fair value of debt securities measured at FVOCI	29	—	—	287	—	287
FVOCI investments - reclassified to profit or loss	29	—	—	14	—	14
Re-measurement actuarial loss on provision for other liabilities and charges		—	—	—	(68)	(68)


Total other comprehensive income, net of tax		—	—	301	(68)	233


Total comprehensive income		—	—	301	6,620	6,921



Transactions with owners
Dividend for 2022	15	—	—	—	(3,500)	(3,500)


Total transactions with owners of the Company		—	—	—	(3,500)	(3,500)


Balance as at 31 December 2023		19,320	688	34,553	27,108	81,669

The Notes on pages 55 to 237 are an integral part of these financial statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Statement of cash flows


		Year ended 31 December


		Group		Company
		2023	2022	2023	2022
			Restated		Restated
	Notes	€’000	€’000	€’000	€’000

Cash flows from operating activities
Cash (used in)/generated from operations	32	(75,143)	(65,460)	10,779	11,262
Dividends received		12,131	10,519	229	1,347
Interest received		20,805	17,729	205	97
Interest paid		—	(27)	—	(27)
Income tax paid		(44,892)	(2,770)	(1,653)	(1,944)


Net cash (used in)/generated from operating activities		(87,099)	(40,009)	9,560	10,735



Cashflow from investing activities
Purchase of investment property	19	(1,614)	(936)	(344)	(76)
Disposal of investment property		—	113	—	9
Purchase of financial investments		(1,767,486)	(1,317,159)	(3,531)	(5,135)
Disposal of financial investments		1,778,156	1,436,826	381	183
Purchase of property, plant and equipment and intangible assets		(7,768)	(9,592)	(2,916)	(3,761)


Net cash generated from/(used in) investing activities		1,288	109,252	(6,410)	(8,780)



Cash flows from financing activities
Dividends paid to owners of the Company		(3,500)	(2,400)	(3,500)	(2,400)
Dividends paid to minority interests		—	(1,000)	—	—


Cash used in financing activities		(3,500)	(3,400)	(3,500)	(2,400)



Net movement in cash and cash equivalents		(89,311)	65,843	(350)	(445)

Movement in cash and cash equivalents
Cash and cash equivalents at beginning of year		137,286	71,443	11,130	11,575


Cash and cash equivalents at end of year	27	47,975	137,286	10,780	11,130

The Notes on pages 55 to 237 are an integral part of these financial statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

Notes to the financial statements

1. Basis of preparation

The financial statements of MAPFRE Middlesea p.l.c. are prepared in accordance with

International Financial Reporting Standards as adopted for use in the European Union

and the Companies Act, 1995. The financial statements of the Group to which the

Company is parent are prepared in accordance with Article 4 of Regulation (EC)

1606/2002 on the application of international accounting standards (the “Regulation”)

which requires that, for each financial period starting on or after 1 January 2005,

companies governed by the law of an EU Member State shall prepare their consolidated

financial statements in conformity with IFRS as adopted by the EU if, at their reporting

date, their securities are admitted to trading on a regulated market of any EU Member

State. The Regulation prevails over the provisions of the Companies Act, 1995 to the

extent that the said provisions of the Companies Act, 1995 are incompatible with the

provisions of the Regulation. Both sets of financial statements as referred to in the

Annual Report relate to both those of the Company and the Group and have also been

prepared in accordance with the Insurance Business Act, 1998.

The financial statements are prepared under the historical cost convention as modified

by the measurement at fair value of: investment property, financial assets and financial

liabilities (including derivatives) at fair value through profit or loss, and at fair value

through other comprehensive income (FVOCI). Investment in associated undertaking

is measured using equity method, that is, cost plus or minus net income or loss of

associate.

This is the first set of the Group's financial statements in which IFRS 17 Insurance

Contracts and IFRS 9 Financial Instruments have been applied. The related changes in

material accounting policies are described further on in this Note.

The preparation of financial statements in conformity with the above reporting

framework requires the use of certain accounting estimates. It also requires

management to exercise its judgement in the process of applying the Group’s

accounting policies. The areas involving a higher degree of judgement or complexity,

or areas where assumptions and estimates are significant to the consolidated financial

statements, are disclosed in Note 3.

The statement of financial position are organised in increasing order of liquidity, with

additional disclosures on the maturity analysis of the Group’s assets and liabilities

provided within the Notes to the financial statements. All amounts in the Notes are

shown in thousands of euro, rounded to the nearest thousand, unless otherwise stated.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

1. Basis of preparation - continued

Standards, interpretations and amendments to published standards effective in 2023

In 2023, the Group adopted new standards, amendments and interpretations to existing

standards that are mandatory for the Group’s accounting period beginning on 1 January

2023. The adoption of IFRS 17 and IFRS 9 as adopted by the EU had a significant

impact on the Group’s accounting policies. Other standards per the requirements of

IFRSs as adopted by the EU did not result in material changes.

Standards, interpretations and amendments to published standards that are not yet

effective

A number of amendments to existing standards are effective for annual periods

beginning on or after 1 January 2024. However, the Group has not early adopted these

amendments in preparing these financial statements and management are of the opinion

that there are no requirements that are expected to have a material impact on the

Group’s financial statements in the period of initial application.

Changes in material accounting policies

(a) IFRS 17 ‘Insurance Contracts’

The Group has adopted IFRS 17 ‘Insurance Contracts’ as adopted by the EU with a date

of transition 1 January 2022, which resulted in changes in accounting policies and

adjustments to the amounts previously recognised in the financial statements. The

Group did not early adopt IFRS 17 in previous periods.

The adoption of IFRS 17 has resulted in significant changes in the Group’s accounting

policies for recognition, classification and measurement of insurance contracts,

reinsurance contracts held and investment contracts with discretionary participation

features. It introduces a model that measures groups of contracts based on the Group’s

estimates of the present value of future cash flows that are expected to arise as the

Group fulfils the contracts, an explicit risk adjustment for non-financial risk and a

Contractual Service Margin (‘CSM').

Under IFRS 17, insurance revenue in each reporting period represents the changes in

the liabilities for remaining coverage that relate to services for which the Group expects

to receive consideration and an allocation of premiums that relate to recovering

insurance acquisition cash flows. In addition, investment components are no longer

included in insurance revenue and insurance service expenses.

Insurance finance income and expenses, are presented separately from insurance

revenue and insurance service expenses.

Income and expenses from reinsurance contracts held other than reinsurance finance

income and expenses are now presented as a single net amount in profit or loss.

Previously, amounts recovered from reinsurers and reinsurance expenses were

presented separately.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

1. Basis of preparation - continued

Changes in material accounting policies - continued

(a) IFRS 17 ‘Insurance Contracts’ - continued

Set out below are disclosures relating to the impact of the adoption of IFRS 17 on the

Group. Further details of the specific IFRS 17 accounting policies applied are described

in more detail in Note 2.

At the transition date (i.e. 1 January 2022), the Group has:

– identified, recognised and measured each group of insurance contracts,

reinsurance contracts held and investment contracts with DPF as if IFRS 17 had

always been applied;

– derecognised previously reported balance that would not have existed if IFRS 17

had always been applied including Value of in-force business and the

corresponding reserves in equity; and

– recognised in equity, on a net basis, any differences between amounts recognised

under IFRS 4 and other applicable standards and IFRS 17.

Given the long-term nature of life insurance contracts and investment contracts with

discretionary participation features (‘DPF’), it was not deemed to be practicable for the

fully retrospective approach to be adopted for all cohorts. Refer to Note 2.20 – Methods

used and judgements applied in determining IFRS 17 transition amounts. The Group

has applied the full retrospective approach on transition to all contracts measured under

the Premium Allocation Approach (PAA) to the extent practicable.

The Group has applied the transition provisions in IFRS 17 and has not disclosed the

impact of the adoption of IFRS 17 on each financial statement line item. The effects of

adopting IFRS 17 on the financial statements at 1 January 2022 are presented in the

statement of changes in equity.

(b) IFRS 9 ‘Financial Instruments’

The Group has adopted IFRS 9 as adopted by the EU. IFRS 9 replaces IAS 39

‘Financial Instruments: Recognition and Measurement’ and became effective for annual

periods beginning on or after 1 January 2018 with early adoption permitted. However,

in September 2016, the International Accounting Standards Board issued amendments

to IFRS 4 'Insurance Contracts' which provide optional relief to eligible insurers in

respect of IFRS 9. The option permitted entities whose predominant activity is issuing

insurance contracts within the scope of IFRS 4, a temporary exemption to defer the

implementation of IFRS 9. IFRS 17, published on 18 May 2017, and amended on 25

June 2020, supersedes IFRS 4 and is applicable for annual periods beginning on or after

1 January 2023, with early adoption permitted. IFRS 17 was adopted by the European

Union (‘EU’) on 19 November 2021, extending to 2023 the temporary exemption for

qualifying insurers to apply IFRS 9. The Group has met the relevant criteria and has

applied the temporary exemption from IFRS 9 for annual periods before 1 January

2023.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

1. Basis of preparation - continued

Changes in material accounting policies - continued

(b) IFRS 9 ‘Financial Instruments’ - continued

The general requirement in IFRS 9 is that an entity must apply IFRS 9 at the date of

initial adoption retrospectively (i.e., as if the new requirements had always been in

effect) in accordance with IAS 8, Accounting Policies, Changes in Accounting

Estimates and Errors. However, IFRS 9 includes certain special transition provisions

designed to make the crossover to IFRS 9 easier.

IFRS 9 contains exemptions from full retrospective application for its classification and

measurement requirements, including impairment. These include an exception from the

requirement to restate comparative information. An entity may restate prior periods

only if it is possible without the use of hindsight. If an entity does not restate

comparatives, it should adjust the opening balance of its retained earnings to take

account of the effect of applying the new standard in the year of initial application.

As permitted by the transitional provisions of IFRS 9, the Group did not restate

comparative figures. Any adjustments to the carrying amounts of financial assets and

financial liabilities at the date of transition were recognised in the opening retained

earnings of the current period.

The adoption of IFRS 9 has resulted in changes to the Group’s accounting policies for

recognition, classification and measurement of financial assets, financial liabilities and

impairment of financial assets as further described in the sections below.

Effect of initial application

Classification of financial assets and financial liabilities

IFRS 9 includes three principal classification categories for financial assets: measured

at amortised cost ('AC'), fair value through other comprehensive income ('FVOCI') and

fair value through profit or loss ('FVTPL'). The classification of financial assets under

IFRS 9 is generally based on the business model in which a financial asset is managed

and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39

categories of held-to-maturity investments, loans and receivables, and available-for-sale

financial assets.

There are no significant changes in the measurement categories for financial liabilities

under IFRS 9 when compared to IAS 39.

Further, IFRS 9 replaces the incurred loss model in IAS 39 with a forward-looking

'expected credit loss' ('ECL') model. The new model applies to financial assets

measured at amortised costs including deposits with banks or credit institutions of the

Group. The Group has recognised an ECL of €134 thousand on its deposits with banks

or credit institutions at transition.

The following table below explains the original measurement categories under IAS 39

and the new measurement categories under IFRS 9 for each class of the Group’s and

Company's financial assets and financial liabilities as at 1 January 2023.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

1. Basis of preparation - continued

Changes in material accounting policies - continued

(b) IFRS 9 ‘Financial Instruments’ - continued

Effect of initial application - continued

Classification of financial assets and financial liabilities - continued


	Original classification under IAS 39	New classification under IFRS 9	Original carrying amount under IAS 39	New carrying amount under IFRS 9
			€'000	€'000
Group
Financial assets
Cash and cash equivalents	Loans and receivables	Amortised cost	137,286	137,284

Financial investments - Other
Government bonds	Available for sale	FVOCI	5,045	5,045
Other debt securities	Available for sale	FVOCI	4,693	4,693
Equity securities	Available for sale	FVTPL (Mandatory)	570	570
Equity securities	FVTPL (designated)	FVTPL (Mandatory)	1,186	1,186
Government bonds	FVTPL (designated)	FVOCI	603	603
Equity securities and units in unit trusts	FVTPL (held for trading)	FVTPL (Mandatory)	972,740	972,740
Debt securities	FVTPL (held for trading)	FVTPL (Mandatory)	777,251	783,205
Collective investment schemes	FVTPL (held for trading)	FVTPL (Mandatory)	102,256	102,256
Forward foreign exchange contracts and swaps	FVTPL (held for trading)	FVTPL (Mandatory)	2,698	2,698
Deposits with banks or credit institutions	Loans and receivables	Amortised cost	116,728	116,988
Trade and other receivables (excluding prepayments)	Loans and receivables	Amortised cost	28,305	21,903


Total financial assets			2,149,361	2,149,171


Financial liabilities
Payables	Amortised cost	Amortised cost	17,702	17,702
Investment contracts liabilities	FVTPL	FVTPL	69,054	69,054


Total financial liabilities			86,756	86,756

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

1. Basis of preparation - continued

Changes in material accounting policies - continued

(b) IFRS 9 ‘Financial Instruments’ - continued

Effect of initial application - continued

Classification of financial assets and financial liabilities - continued


	Original classification under IAS 39	New classification under IFRS 9	Original carrying amount under IAS 39	New carrying amount under IFRS 9
			€'000	€'000
Company
Financial assets
Cash and cash equivalents	Loans and receivables	Amortised cost	11,130	11,128

Financial investments - Other
Government bonds	Available for sale	FVOCI	5,045	5,045
Other debt securities	Available for sale	FVOCI	4,693	4,693
Equity securities	Available for sale	FVTPL (Mandatory)	570	570
Equity securities	FVTPL (designated)	FVTPL (Mandatory)	1,186	1,186
Government bonds	FVTPL (designated)	FVOCI	603	603
Trade and other receivables (excluding prepayments)	Loans and receivables	Amortised cost	17,255	17,201

Total financial assets			40,482	40,426

Financial liabilities
Payables	Amortised cost	Amortised cost	7,288	7,288


Total financial liabilities			7,288	7,288

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

1. Basis of preparation - continued

Changes in material accounting policies - continued

(b) IFRS 9 ‘Financial Instruments’ - continued

Effect of initial application - continued

Classification of financial assets and financial liabilities - continued

The Group’s material accounting policies on the classification of financial instruments

under IFRS 9 are set out in Note 2. The application of these policies resulted in the

reclassifications set out in the table above and explained below.

a. Cash and cash equivalents consist of deposits with banks or credit institutions.

The Group's ultimate objective with regards to deposits with banks or credit

institutions is that of collecting contractual cash flows that solely represent

payments of principal and interest. On this basis, such financial assets are

classified and measured at amortised cost and are subject to expected credit losses

(ECL) under IFRS 9.

b. The Company’s ultimate objective with regards to its debt securities and

government bonds portfolio is that of collecting contractual cash flows that solely

represent payments of principal and interest and sell. The Company has limited

history of sales and its intention to conduct any sales of investments in the future

is not as a result of an active trading intent. On this basis, the Company considers

that under IFRS 9 these portfolios are held within a business model whose

objective is achieved by collecting contractual cash flows and selling financial

assets. The contractual terms of these financial assets give rise on specified dates

to cash flows that are "solely payments of principal and interest" (SPPI). These

assets have therefore been classified as financial assets at FVOCI under IFRS 9.

c. Receivables other than operating lease receivables are measured at amortised cost

using the effective interest method. Interest income and impairment are

recognised in profit or loss. Any gain or loss on derecognition is also recognised

in profit or loss.

d. Under IAS 39, investments in equity securities that were not designated as at

FVTPL were classified as available-for-sale financial assets. Under IFRS 9, these

assets are mandatorily measured at FVTPL because they do not give rise to cash

flows that are SPPI.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2.Accounting policies

The material accounting policies adopted in the preparation of these financial

statements are set out below. These policies have been consistently applied to all the

years presented, unless otherwise stated.

In addition, the Group adopted Disclosure of Accounting Policies (Amendments to IAS

1 and IFRS Practice Statement 2) from 1 January 2023. The amendments require the

disclosure of ‘material’, rather than ‘significant’, accounting policies. Although the

amendments did not result in any changes to the accounting policies themselves, they

impacted the accounting policy information disclosed in the below sections.

2.1Consolidation

(a) Subsidiary undertakings

The consolidated financial statements incorporate the assets, liabilities and results of

the Company and its subsidiary (or group) undertakings drawn up to 31 December each

year. Subsidiary undertakings are those companies over which the Group has control,

either by way of majority shareholding, through contractual agreements with the other

vote holders of the investee or rights arising from other contractual agreements, giving

it the power to govern the financial and operating policies of the investee. Specifically,

the Group controls an investee if and only if the Group has:

– Power over the investee (i.e. existing rights that give it the current ability to direct

the relevant activities of the investee);

– Exposure, or rights, to variable returns from its involvement with the investee; and

– The ability to use its power over the investee to affect its returns.

The Group re-assesses whether or not it controls an investee if facts and circumstances

indicate that there are changes to one or more of the three elements of control.

Consolidation of a subsidiary begins when the Group obtains control over the

subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,

income and expenses of a subsidiary acquired or disposed of during the year are

included in the statement of financial position and the statement of comprehensive

income from the date the Group gains control until the date the Group ceases to control

the subsidiary.

The Group applies the acquisition method to account for business combinations. The

consideration transferred for the acquisition of a subsidiary is the fair value of the assets

transferred, the liabilities incurred to the former owners of the acquiree and the equity

interests issued by the Group. The consideration transferred includes the fair value of

any asset or liability resulting from a contingent consideration arrangement. Identifiable

assets acquired and liabilities and contingent liabilities assumed in a business

combination are measured initially at their fair values at the acquisition date. The Group

recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition

basis, either at fair value or at the non-controlling interest’s proportionate share of the

recognised amounts of acquiree’s identifiable net assets.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2.Accounting policies - continued

2.1Consolidation - continued

(a) Subsidiary undertakings - continued

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the

acquirer’s previously held equity interest in the acquiree is re-measured to fair value at

the acquisition date through profit or loss.

Goodwill is initially measured as the excess of the aggregate of the consideration

transferred and the fair value of non-controlling interest over the net identifiable assets

acquired and liabilities assumed. If this consideration is lower than the fair value of the

net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Profit or loss and each component of other comprehensive income are attributed to the

equity holders of the parent of the Group and to the non-controlling interests, even if

this results in the non-controlling interests having a deficit balance. When necessary,

adjustments are made to the financial statements of subsidiaries to bring their

accounting policies in line with the Group’s accounting policies. All intra-group assets

and liabilities, equity, income, expenses and cash flows relating to transactions between

members of the Group are eliminated in full on consolidation. A list of the Group’s

subsidiaries is set out in Note 20.

(b) Associated undertakings

An associate is an entity over which the Group has significant influence. Significant

influence is the power to participate in the financial and operating policy decisions of

the investee, but is not control or joint control over those policies. The considerations

made in determining significant influence are similar to those necessary to determine

control over subsidiaries. Except for investment-linked insurance funds, interests in

associated undertakings are accounted for by the equity method of accounting and are

initially recognised at cost and the carrying amount is increased or decreased to

recognise the investor’s share of profit or loss of the investee after the date of

acquisition.

The Group’s investment in associates includes goodwill (net of any accumulated

impairment loss) identified on acquisition. Equity accounting involves recognising in

the profit or loss the share of the associated undertaking’s post-acquisition profits or

losses. The interest in the associated undertaking is carried in the statement of financial

position at an amount that reflects the share of the net assets of the associated

undertaking. When the Group’s share of losses in an associate equals or exceeds its

interest in the associate, including any other unsecured receivables, the Group does not

recognise further losses, unless it has incurred obligations or made payments on behalf

of the associate.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.1Consolidation - continued

(b) Associated undertakings - continued

Intra-group gains on transactions between the Group and its associates are eliminated to

the extent of the Group’s interest in the associates. Intra-group losses are also

eliminated unless the transaction provides evidence of an impairment of the asset

transferred. Accounting policies for associated undertakings are changed where

necessary to ensure consistency with the policies adopted by the Group. A list of the

Group’s associated undertakings is set out in Note 21.

Interests in associated undertakings that are allocated to the insurance fund are

designated as financial assets at fair value through profit or loss. They are accounted

for in accordance with the recognition and measurement principles described in Note

2.9.

2.2Segment reporting

Operating segments are reported in a manner consistent with the internal reporting

provided to the chief operating decision-maker. The chief operating decision-maker,

responsible for allocating resources and assessing performance of the operating

segments, has been identified as the executive management which implements the

strategic decisions taken by the Board. In identifying the Group’s business segments,

the chief operating decision-maker has considered the different categories of insurance

classes of business.

2.3Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured

using the currency of the primary economic environment in which the entity operates

(the ‘functional currency’). The euro is the Group’s and Company’s functional and

presentation currency.

Transactions and balances

Transactions in foreign currencies have been converted into the functional currency at

the rates of exchange ruling on the date of the transaction or valuation where items are

re-measured. Foreign exchange gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and

liabilities denominated in foreign currencies are recognised in the profit or loss account.

All other foreign exchange gains and losses are presented in the profit or loss account

within ‘Other investment revenue/(losses)’.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2.Accounting policies - continued

2.3 Foreign currency translation - continued

Transactions and balances - continued

Translation differences on non-monetary items, mainly arising on equities held at fair

value through profit or loss, are reported as part of 'Other investment revenue/(losses)'.

2.4Intangible assets

(a)Computer software

Acquired computer software licences are measured at cost less any accumulated

amortization and any accumulated impairment losses. Acquired computer software

licenses are capitalised on the basis of the costs incurred to acquire and bring to use the

specific software. These costs are amortised using the straight-line method over their

useful lives, not exceeding a period of ten years. All costs associated with maintaining

computer software programmes are recognised as an expense as incurred.

(b) Deferred policy acquisition costs

Incremental costs that are incurred in acquiring new investment contracts without DPF

are capitalised as deferred acquisition costs (DAC).

The DAC is subsequently amortised over the life of the contracts as follows:

– For long-term investment contracts with a fixed maturity date, DAC is amortised

over the life of the contract.

– For long term investment contracts with no fixed date of maturity, DAC is

amortised over the estimated life of the contract. This basis is reviewed periodically

with reference to the historical experience of surrenders for these contracts.

2.5Property, plant and equipment

All property, plant and equipment is initially recorded at historical cost. Freehold land

and buildings are subsequently shown at fair value based on periodic valuations by

external independent valuers, less subsequent depreciation for buildings. Valuations are

carried out on a regular basis such that the carrying amount of property does not differ

materially from that which would be determined using fair values at the end of the

reporting period. Any accumulated depreciation at the date of revaluation is eliminated

against the gross carrying amount of the asset, and the net amount is restated to the re-

valued amount of the asset. All other property, plant and equipment is stated at

historical cost less depreciation and impairment losses. Historical cost includes

expenditure that is directly attributable to the acquisition of the items.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.5Property, plant and equipment - continued

Subsequent costs are included in the asset’s carrying amount or recognised as a separate

asset, as appropriate, only when it is probable that future economic benefits associated

with the item will flow to the Group and the cost of the item can be measured reliably.

The carrying amount of the replaced part is derecognised. All other repairs and

maintenance costs are charged to the profit or loss account during the financial period

in which they are incurred.

Increases in the carrying amount arising on revaluation of land and buildings are

credited to other comprehensive income as other reserves in shareholders’ equity.

Decreases that offset previous increases of the same asset are charged against other

comprehensive income as other reserves directly in equity; all other decreases are

charged to the profit or loss account. Each year the difference between depreciation

based on the revalued carrying amount of the asset charged to the profit or loss account

and depreciation based on the asset’s original cost is transferred from ‘other reserves’ to

‘retained earnings’.

Freehold land is not depreciated as it is deemed to have an indefinite life. Depreciation

on other assets is calculated using the straight-line method to allocate their cost or

revalued amounts to their residual values over their estimated useful lives as follows:


	Buildings	100 years
	Leasehold improvements	10 - 40 years
	Motor vehicles	5 years
	Furniture, fittings and equipment	3 - 10 years

The assets’ residual values and useful lives are reviewed at the end of each reporting

period and adjusted if appropriate.

An asset’s carrying amount is written down immediately to its recoverable amount if

the asset’s carrying amount is greater than its estimated recoverable amount (accounting

policy 2.16).

Gains and losses on disposals are determined by comparing proceeds with carrying

amounts and are included in the profit or loss account. When revalued assets are sold,

the amounts included in other reserves relating to the assets are transferred to retained

earnings.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.6Investment property

Freehold and leasehold properties treated as investment property principally comprise

office and other commercial buildings that are held for long term rental yields and that

are not occupied by the Group or Company respectively. Investment property is initially

measured at cost and subsequently carried at fair value. Fair value is based on active

market prices, adjusted, if necessary for any difference in the nature, location or

condition of the specific asset. If this information is not available, the Group uses

alternative valuation methods such as discounted cash flow projections or recent prices

in less active markets. These valuations are prepared annually by a qualified valuation

expert. Investment property that is being redeveloped for continuing use as investment

property, or for which the market has become less active, continues to be measured at

fair value. Changes in fair values are reported in the profit or loss account.

If an investment property becomes owner-occupied, it is reclassified as property, plant

and equipment, and its fair value at the date of reclassification becomes its cost for

subsequent accounting purposes.

2.7Investments in subsidiary undertakings

In the Company’s financial statements, investments in subsidiary undertakings are

accounted for by the cost method of accounting less impairment.

Provisions are recorded where, in the opinion of the directors, at the end of a reporting

period, there is an impairment in value. Where there has been an impairment in the

value of an investment, it is recognised as an expense in the period in which the

impairment is identified or has occurred. If in a subsequent period, the amount of the

impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment was recognised, the previously recognised impairment

loss is reversed by adjusting the allowance account. The amount of the reversal is

recognised in the profit or loss account.

The dividend income from such investments is included in the profit or loss account in

the accounting year in which the Company’s rights to receive payment of any dividend

is established.

On disposal of an investment, the difference between the net disposal proceeds and the

carrying amount is charged or credited to the profit or loss account and included within

'Other investment revenue/(losses)'.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.8Investments in associated undertakings

In the Company’s financial statements, investments in associated undertakings are

accounted using the equity method. They are initially recognised at cost which includes

transaction costs. Subsequent to initial recognition the carrying amount is increased or

decreased to recognise the investor’s share of profit or loss. Distributions received from

an investee reduce the carrying amount of the investment. The changes in the investee’s

proportionate interest arising from changes in the investee’s other comprehensive

income, such as those arising from revaluation of property, plant and equipment and

from exchange translation differences are recognised in the other comprehensive

income.

2.9Financial instruments

Policy applicable as from 1 January 2023

(a) Summary of measurement categories

The Group classifies its financial assets and financial liabilities into the following

categories:


	Classification	Reason

Cash and cash equivalents	Amortised Cost	SPPI, hold to collect business model
Other investments	FVTPL	Trading or portfolio managed at FV
Other investments	FVOCI	SPPI, hold to collect and sell business model
Other investments	Amortised Cost	SPPI, hold to collect business model
Trade and other receivables	Amortised Cost	SPPI, hold to collect business model
Other payables	Amortised Cost	Not managed at FV
Investment contract liabilities	FVTPL	Managed at FV

The Group does not apply hedge accounting.

(b)Initial recognition and measurement

Financial assets and financial liabilities are recognised when the Group becomes a party

to the contractual provisions of the instrument. Regular way purchases and sales of

financial assets are recognised on the trade date (that is, the date on which the Group

commits to purchase or sell the asset).

At initial recognition, the Group measures a financial asset or financial liability at its

fair value, plus or minus, in the case of a financial asset or financial liability not at

FVTPL, transaction costs that are incremental and directly attributable to the acquisition

or issue of the financial asset or financial liability, such as fees and commissions.

Transaction costs of financial assets and financial liabilities carried at FVTPL are

expensed in profit or loss. Immediately after initial recognition, an ECL allowance is

recognised for financial assets measured at AC and investments in debt instruments

measured at FVOCI.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.9Financial instruments - continued

Policy applicable as from 1 January 2023 - continued

(b)Initial recognition and measurement - continued

For financial instruments traded in active markets, the determination of fair values of

financial assets and financial liabilities is based on quoted market prices or dealer price

quotations. This includes listed equity securities and quoted debt instruments on major

exchanges. The quoted market price used for financial assets held by the Group is the

current bid price or closing price as appropriate. A financial instrument is regarded as

quoted in an active market if quoted prices are readily and regularly available from an

exchange, dealer, broker, industry group, pricing service or regulatory agency, and

those prices represent actual and regularly occurring market transactions on an arm’s

length basis. If the market for a financial asset is not active, the Group establishes fair

value by using valuation techniques. These include the use of recent arm’s length

transactions, reference to other instruments that are substantially the same or valued by

reference to the net assets of the underlying investment.

When the fair value of financial assets and liabilities differs from the transaction price

on initial recognition, the entity recognises the difference as follows:

a. When the fair value is evidenced by a quoted price in an active market for an

identical asset or liability (that is, a Level 1 input) or based on a valuation technique

that uses only data from observable markets, the difference is recognised as a gain

or loss.

b. In all other cases, the difference is deferred and the timing of recognition of

deferred day one profit or loss is determined individually. It is either amortised over

the life of the instrument, deferred until the instrument’s fair value can be

determined using market observable inputs, or realised through settlement.

Amortised cost (AC) is the amount at which the financial asset or financial liability is

measured at initial recognition minus the principal repayments, plus or minus the

cumulative amortisation using the effective interest method for any difference between

the initial amount and the maturity amount and, for financial assets, adjusted for any

loss allowance.

The effective interest rate (EIR) is the rate that exactly discounts estimated future cash

payments or receipts through the expected life of the financial asset or financial liability

to the gross carrying amount of a financial asset (that is, its AC before any impairment

allowance) or to the AC of a financial liability. The calculation does not consider the

ECL and includes transaction costs, premiums or discounts and fees and points paid or

received that are integral to the EIR.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.9Financial instruments - continued

Policy applicable as from 1 January 2023 - continued

When the Group revises the estimates of future cash flows, the carrying amount of the

respective financial asset or financial liability is adjusted to reflect the new estimate

discounted using the original EIR. Any changes are recognised in profit or loss.

Interest revenue is calculated by applying the EIR to the gross carrying amount of

financial assets recognised at AC or FVOCI.

2.9.1 Financial assets

Policy applicable as from 1 January 2023

(a) Business model

The business model reflects how the Group manages assets in order to generate cash

flows. That is, it reflects whether the Group’s objective is solely to collect the

contractual cash flows from assets or to collect both the contractual cash flows and cash

flows arising from the sale of assets. If neither of these is applicable (for example,

financial assets are held for trading purposes), the financial assets are classified as part

of the other business model and measured at FVTPL.

Factors considered by the Group in determining the business model for a group of

assets include past experience on how the cash flows for these assets were collected,

how the asset’s performance is evaluated and reported to key management personnel,

how risks are assessed and managed, and how managers are compensated. For example,

the business model for the investments underlying investment contracts with DPF is to

hold to collect and sell contractual cash flows. The proceeds from the contractual cash

flows of the financial assets are used to settle insurance contract liabilities as they

become due.

(b) Solely payments of principal and interest ('SPPI')

Where the business model is to hold assets to collect contractual cash flows or to collect

contractual cash flows and sell, the Group assesses whether the financial instruments’

cash flows represent SPPI (the SPPI test). In making this assessment, the Group

considers whether the contractual cash flows are consistent with a basic lending

arrangement (that is, interest includes only consideration or the time value of money,

credit risk, other basic lending risks and a profit margin that is consistent with a basic

lending arrangement). Where the contractual terms introduce exposure to risk or

volatility that is inconsistent with a basic lending arrangement, the related financial

asset is classified and measured at FVTPL.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.1 Financial assets - continued

Policy applicable as from 1 January 2023 - continued

Debt instruments are those instruments that meet the definition of a financial liability

from the issuer’s perspective, such as government and corporate bonds.

The classification and subsequent measurement of debt instruments depend on:

– the Group’s business model for managing the asset; and

– the cash flow characteristics of the asset (represented by SPPI).

Based on these factors, the Group classifies its debt instruments into one of the

following three measurement categories:

a. AC: Assets that are held for collection of contractual cash flows where those

cash flows represent SPPI, and that are not designated at FVTPL, are measured

at AC. The carrying amount of these assets is adjusted by any ECL allowance

recognised and measured, as described further below. Interest revenue from

these financial assets is included in the profit or loss under interest revenue

calculated using the effective interest method.

b. FVOCI: Financial assets that are held for collection of contractual cash flows

and for selling the assets, where the assets’ cash flows represent SPPI, and that

are not designated at FVTPL, are measured at FVOCI. Movements in the

carrying amount are taken through OCI, except for the recognition of

impairment gains or losses, interest revenue and foreign exchange gains and

losses on the instrument’s AC, which are recognised in profit or loss. When the

financial asset is derecognised, the cumulative gain or loss previously

recognised in OCI is reclassified from equity to profit or loss and recognised in

other investment revenue/losses. Interest revenue from these financial assets is

included in interest revenue calculated using the effective interest method.

c. FVTPL: Assets that do not meet the criteria for AC or FVOCI are measured at

FVTPL. Also, some assets are voluntarily measured at FVTPL, because this

significantly reduces an accounting mismatch. A gain or loss on a debt

investment that is subsequently measured at FVTPL is recognised and presented

in the consolidated statement of profit or loss within other investment revenue/

losses in the period in which it arises.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.1 Financial assets - continued

Policy applicable as from 1 January 2023 - continued

The Group reclassifies debt instruments only when its business model for managing

those assets changes. The reclassification takes place from the start of the first reporting

period following the change. Such changes are expected to be very infrequent, and none

occurred during the period.

(d) Equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer’s

perspective (that is, instruments that do not contain a contractual obligation to pay and

that evidence a residual interest in the issuer’s net assets). Examples of equity

instruments include basic ordinary shares.

The Group subsequently measures all equity investments at FVTPL . Gains and losses

on equity investments at FVTPL are included in the line ‘Other investment revenue/

losses’ in the consolidated statement of profit or loss.

(e) Cash and cash equivalents

Cash and cash equivalents include cash balances and financial instruments with original

maturities of three months or less from the date of acquisition that are subject to an

insignificant risk of changes in their fair value, and are used by the Group in the

management of its short-term commitments. Cash and cash equivalents are carried in

the statement of financial position at AC net of ECL.

(f) Impairment

(i) Debt instruments and cash and cash equivalents

The Group assesses the ECL associated with its debt instruments measured at AC and

debt instrument assets carried at FVOCI. The Group recognises a loss allowance for

such losses at each reporting date. The measurement of the ECL reflects:

a. an unbiased evaluation of a range of possible outcomes and their probabilities of

occurrence;

b. discounting for the time value of money; and

c. reasonable and supportable information that is available without undue cost or effort

at the reporting date about past events, current conditions and forecasts of future

economic conditions

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.1 Financial assets - continued

Policy applicable as from 1 January 2023 - continued

(f) Impairment - continued

(i) Debt instruments and cash and cash equivalents- continued

However, IFRS 9 emphasises that estimating ECL may not necessarily need to be a

complex process and that an entity need not identify every possible scenario. In some

cases, relatively simple modelling may be sufficient without the need for many detailed

simulations or scenarios.

The Group calculates the ECL at an instrument level, using three main components:

– a probability of default (‘PD’),

– a loss given default (‘LGD’),

– and the exposure at default (‘EAD’).

At initial recognition, an allowance is required for ECL resulting from default events

that are possible within the next 12 months, or less, where the remaining life is less than

12 months (‘12-month ECL’).

In the event of a ‘significant increase in credit risk’ (SICR), an allowance is required for

ECL resulting from all possible default events over the expected life of the financial

instrument (‘Lifetime ECL’). In the case of a non-maturity deposit, the Group assumes

a lifetime of 1 month.

Financial assets where 12-month ECL is recognised are considered to be ‘stage 1’;

financial assets which are considered to have experienced a SICR are classified as

‘stage 2’; and financial assets for which there is objective evidence of impairment, and

which are so considered to be in default or otherwise credit impaired, are classified as

‘stage 3’.

The ECL allowance and any changes to it are recognised by recognising impairment

gains and losses in profit or loss.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.1 Financial assets - continued

Policy applicable as from 1 January 2023 - continued

(f) Impairment - continued

(ii) Trade receivables

For trade receivables, the Company applies the simplified approach required by IFRS 9,

which requires expected lifetime losses to be recognised from initial recognition of the

receivables. An impairment analysis is performed at each reporting date using a

provision matrix to measure expected credit losses. The provision rates are based on

days past due for groupings of various customer segments with similar loss patterns.

The Company considers trade receivables in default when contractual payments are past

their credit terms of 90 days to be in default.

Trade receivables are written off when there is no reasonable expectation of recovery.

Indicators that there is no reasonable expectation of recovery include, among others, the

probability of insolvency or significant financial difficulties of the debtor.

(g) Derecognition

Financial assets, or a portion thereof, are derecognised when the contractual rights to

receive the cash flows from the assets have expired, or when they have been transferred

and either (i) the Group transfers substantially all of the risks and rewards of ownership;

or (ii) the Group neither transfers nor retains substantially all of the risks and rewards of

ownership and the Group has not retained control.

The Group enters into transactions where it retains the contractual rights to receive cash

flows from assets but assumes a contractual obligation to pay those cash flows to other

entities and transfers substantially all of the risks and rewards. These transactions are

accounted for as pass-through transfers that result in derecognition if the Group:

a. has no obligation to make payments unless it collects equivalent amounts from the

assets;

b. is prohibited from selling or pledging the assets; and

c. has an obligation to remit any cash that it collects from the assets without material

delay

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.1 Financial assets - continued

Policy applicable as from 1 January 2023 - continued

(h) Modification

If cash flows are modified when the debtor is in financial difficulties, then the objective

of the modification is usually to maximise recovery of the original contractual cash

flows rather than to originate a new asset with substantially different terms. If the

Group plans to modify a financial asset in a way that would result in forgiveness of cash

flows, then it first considers whether a portion of the asset should be written off before

the modification takes place.

2.9.2 Financial liabilities

Policy applicable as from 1 January 2023

(a) Classification and subsequent measurement

In both the current and prior periods, financial liabilities were and remain classified and

subsequently measured at AC, except for derivatives and investment contracts without

DPF, which were and remain measured at FVTPL.

Investment contracts without DPF are financial liabilities whose fair value is dependent

on the fair value of underlying financial assets and are designated at inception at

FVTPL. The Group designates these investment contracts to be measured at FVTPL,

because it eliminates or significantly reduces a measurement or recognition

inconsistency (that is, an accounting mismatch) that would otherwise arise from

measuring assets or liabilities or recognising the gains and losses on them on different

bases.

The Group’s main valuation techniques incorporate all factors that market participants

would consider and make maximum use of observable market data. The fair value of

financial liabilities for investment contracts without DPF is determined using the

current unit values in which the contractual benefits are denominated. These unit values

reflect the fair values of the financial assets contained within the Group’s unitised

investment funds linked to the financial liability. The fair value of the financial

liabilities is obtained by multiplying the number of units attributed to each contract

holder at the end of the reporting period by the unit value for the same date.

When the investment contract has a surrender option, the fair value of the financial

liability is never less than the amount payable on surrender.

Changes in the fair value of financial liabilities measured at FVTPL are presented in the

statement of profit or loss.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.2 Financial liabilities - continued

Policy applicable as from 1 January 2023 - continued

(b) Derecognition

Financial liabilities are derecognised when they are extinguished (that is, when the

obligation specified in the contract is discharged, is cancelled or expires). The Group

also derecognises a financial liability when its terms are modified and the cash flows of

the modified liability are substantially different, in which case a new financial liability

based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount

extinguished and the consideration paid (including any non-cash assets transferred or

liabilities assumed) is recognised in profit or loss.

If a financial liability measured at amortised cost is modified but not substantially, then

it is not derecognised.

(d) Derivatives

Derivatives are initially recognised at fair value on the date on which the derivative

contract is entered into and are subsequently remeasured at fair value. All derivatives

are carried as assets when fair value is positive and as liabilities when fair value is

negative. Fair values are obtained from quoted market prices in active markets, and

other valuation techniques, as appropriate. Subsequent changes in the fair value of any

derivative instruments are recognised immediately in profit or loss.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.3 Financial assets

Policy applicable before 1 January 2023

The Group classifies its financial assets (other than its investment in subsidiaries) into

the following categories: financial assets at fair value through profit or loss, other

available-for-sale investments and loans and receivables. The directors determine the

appropriate classification of financial assets at the time of purchase and re-evaluate such

designation at every reporting date.

(a) Classification

• Financial assets at fair value through profit or loss are part of a group of investments

that is managed on a portfolio basis and whose performance is evaluated and

reported internally on a fair value basis to the Board and relevant key management

personnel in accordance with a documented investment strategy. Assets that are part

of these portfolios are designated upon initial recognition at fair value through profit

or loss. Financial assets that are held to match insurance and investment contracts

liabilities are also designated at inception as fair value through profit or loss to

eliminate or significantly reduce the accounting mismatch that would otherwise

arise from measuring insurance contract assets or liabilities, or recognising the gains

and losses on them on different basis.

• Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market, other than those that the Group

has designated at fair value through profit or loss. They include, inter alia,

reinsurance contract assets, other assets, cash and cash equivalents in the statement

of financial position as well as other financial investments (comprising deposits

with credit institutions, and loans) classified as financial assets at amortised cost

within Note 22.

• Available-for-sale investments are those non-derivative financial assets that are

designated as available-for-sale or are not classified as (a) loans and receivables, (b)

held-to-maturity or (c) financial assets at fair value through profit or loss.

(b) Recognition and measurement

All purchases and sales of investments are recognised on the trade date, which is the

date that the Group commits to purchase or sell the assets. All investments are initially

recognised at fair value plus, in the case of all financial assets not carried at fair value

through profit or loss, transaction costs that are directly attributable to their acquisition.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.3 Financial assets - continued

Policy applicable before 1 January 2023 - continued

(b) Recognition and measurement - continued

Financial assets are de-recognised when the rights to receive cash flows from them have

expired or where they have been transferred and the Group has also transferred

substantially all risks and rewards of ownership.

Financial assets at fair value through profit or loss and other available-for-sale

investments are subsequently re-measured at fair value. Loans and receivables are

carried at amortised cost using the effective interest method, less any provision for

impairment. Realised and unrealised gains and losses arising from changes in the value

of the ‘financial assets at fair value through profit or loss’ category are presented in the

profit or loss account in the period in which they arise.

Changes in the fair value of monetary and non-monetary securities classified as

available-for-sale are recognised in other comprehensive income. When securities

classified as available-for-sale are sold or impaired, the accumulated fair value

adjustments recognised in other comprehensive income are included in the profit or loss

account within other investment revenue/losses.

For financial instruments traded in active markets, the determination of fair values of

financial assets and financial liabilities is based on quoted market prices or dealer price

quotations. This includes listed equity securities and quoted debt instruments on major

exchanges. The quoted market price used for financial assets held by the Group is the

current bid price. A financial instrument is regarded as quoted in an active market if

quoted prices are readily and regularly available from an exchange, dealer, broker,

industry group, pricing service or regulatory agency, and those prices represent actual

and regularly occurring market transactions on an arm’s length basis. If the market for a

financial asset is not active, the Group establishes fair value by using valuation

techniques. These include the use of recent arm’s length transactions, reference to other

instruments that are substantially the same and discounted cash flow analysis.

Derivatives are recognised at fair value on the date on which a derivative contract is

entered into and are subsequently re-measured at their fair value. Fair values are

obtained from quoted market prices in active markets and other valuation techniques, as

appropriate. Subsequent changes in the fair value of any derivative instruments are

recognised immediately in the profit or loss account. All derivatives are carried as

assets when fair value is positive, and as liabilities when fair value is negative.

The Group enters into currency forward contracts to hedge the foreign exchange risk

arising on its investments denominated in a foreign currency. These transactions

provide effective economic hedges under the Group’s risk management policies.

However, hedge accounting under the specific rules in IAS 39 is not required because

the change in the value of the hedged financial instrument is recognised in profit or

loss.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.3 Financial assets - continued

Policy applicable before 1 January 2023 - continued

The Group assesses at the end of each reporting period whether there is objective

evidence that a financial asset or group of financial assets is impaired. A financial asset

or group of financial assets is impaired and impairment losses are incurred only if there

is objective evidence of impairment as a result of one or more events that have occurred

after the initial recognition of the asset (“a loss event”) and that loss event (or events)

has an impact on the estimated future cash flows of the financial asset or group of

financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes

observable data that comes to the attention of the Group about the following events:

a. significant financial difficulty of the issuer or debtor;

b. a breach of contract, such as a default or delinquency in payments;

c.it becoming probable that the issuer or debtor will enter bankruptcy or other

financial reorganisation;

d. the disappearance of an active market for that financial asset because of financial

difficulties; or

e. observable data indicating that there is a measurable decrease in the estimated future

cash flow from a group of financial assets since the initial recognition of those

assets, although the decrease cannot yet be identified with the individual financial

assets in the Group.

The Group first assesses whether objective evidence of impairment exists individually

for financial assets that are individually significant. If the Group determines that no

objective evidence of impairment exists for an individually assessed financial asset,

whether significant or not, it includes the asset in a group of financial assets with

similar credit risk characteristics and collectively assesses them for impairment. Assets

that are individually assessed for impairment and for which an impairment loss is or

continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred on loans and

receivables carried at amortised cost, the amount of the loss is measured as the

difference between the asset’s carrying amount and the present value of estimated future

cash flows discounted at the financial asset’s original effective interest rate. The

carrying amount of the asset is reduced through the use of an allowance account and the

amount of the loss is recognised in the profit or loss account.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.3 Financial assets - continued

Policy applicable before 1 January 2023 - continued

If in a subsequent period, the amount of the impairment loss decreases and the decrease

can be related objectively to an event occurring after the impairment was recognised

(such as improved credit rating), the previously recognised impairment loss is reversed

by adjusting the allowance account. The amount of the reversal is recognised in the

profit or loss account.

(d) Assets classified as investments in associated undertakings/other available-for-sale

investments

The Group assesses at end of the reporting period whether there is objective evidence

that an available-for-sale financial asset is impaired, including in the case of equity

investments classified as available-for-sale, a significant or prolonged decline in the fair

value of the security below its cost. ‘Significant’ is evaluated against the original cost

of the investment and ‘prolonged’ against the period in which the fair value has been

below its original cost. If any such evidence exists for available-for-sale financial assets,

the cumulative loss – measured as the difference between the acquisition cost and

current fair value, less any impairment loss on the financial asset previously recognised

in the profit or loss – is removed from equity and recognised in the profit or loss

account. Impairment losses recognised in the profit or loss account on equity

instruments are not subsequently reversed through the profit or loss account but through

other comprehensive income as other reserves.

2. Accounting policies - continued

2.9Financial instruments - continued

2.9.4 Financial liabilities

Policy applicable before 1 January 2023

Financial liabilities are initially recognised on the trade date, which is the date the

Group becomes a party to the contractual provisions of the instruments and

derecognises a financial liability when its contractual obligations are discharged,

cancelled or expire.

Borrowings are recognised initially at their fair value, net of incremental direct

transaction costs incurred. Borrowings are subsequently stated at amortised cost; any

difference between the proceeds (net of incremental direct transaction costs) and the

redemption value is recognised in the profit or loss account over the period of the

borrowings using the effective interest method. Borrowings are classified as current

liabilities unless the Group has an unconditional right to defer settlement of the liability

for at least 12 months after the end of the reporting year.

2.Accounting policies - continued

2.10 Insurance and investment contracts issued and reinsurance contracts held

The Group issues contracts that transfer insurance risk or financial risk or both.

(a)Definition and classification

The following table provides an overview of the Group’s assessment of its products

and whether these fall in scope of IFRS 17:


Type of contract	Contracts issued	Within scope of IFRS 17	Measurement model	Description of benefit
Short-term insurance contracts	Insurance contracts - Non-Life and Group Life contracts	Yes	PAA	Pure insurance contracts carrying significant insurance risk where the obligation of the Group towards the insured is the payment for loss incurred if the insured event occurs whilst the policy is in force.
Long-term insurance contracts - Life risk	Insurance contracts - Term assurance including term riders	Yes	General Measurement Model ('GMM')	Pure insurance contracts carrying significant insurance risk where the obligation of the Group towards the insured is the payment of a death benefit, if the death occurs whilst the policy is in force.
Long-term insurance contracts - Life risk	Unit-linked – Maximum Investment Plan	Yes	GMM	A unit-linked contract with significant insurance risk is one that incorporates a material sum assured within the contract (i.e. the sum assured/minimum death benefit provided, exceeds the investment value of the product).


Direct participating contracts	With-profits (Investment contracts with DPF)	Yes	Variable Fee Approach ('VFA')	Investment contracts with DPF where the obligation of the Group towards the insured also includes an annual discretionary investment return (declared bonus rate).
Direct participating contracts	Hybrids (Investment contracts with DPF)	Yes	VFA	These are mainly unit-linked products including with-profits components (investment contract with DPF).
Investment contracts	Unit-linked - others (Investment contracts without DPF)	No	FVTPL	Investment contracts which pays the policyholder 1% of the fund value at the time of death, this component is deemed to be immaterial to the overall value of the fund and therefore, no significant insurance risk is deemed to arise from it. Therefore, these contracts will be valued in line with IFRS 9 with effect from 1 January 2023 and IAS 39 prior to 1 January 2023.

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(a)Definition and classification - continued

Insurance contracts are contracts under which the Group accepts significant insurance

risk from a policyholder by agreeing to compensate the policyholder if a specified

uncertain future event adversely affects the policyholder. In making this assessment, all

substantive rights and obligations, including those arising from law or regulation, are

considered on a contract by contract basis. Judgement is used to assess whether a

contract transfers insurance risk and whether the accepted insurance risk is significant.

Generally, the Group defines as significant insurance risk the possibility of having to

pay benefits on the occurrence of an insured event that at least 5% more than the

benefits payable (on a present value basis) if the sum insured event did not occur. The

Group accounts for these contracts under IFRS 17.

The Group also issues term riders which represent an add-on to a basic policy that

provides additional benefits to policy holders (at additional cost). They can be

purchased by a policy holder concurrently to a basic policy or at a subsequent date, i.e.

a date after the inception of the basic policy. The addition of a term rider triggers

medical underwriting at the point in time the rider is added, giving the Group the

ability to reprice the policy at that point in time. The Group has concluded that term

riders are to be separated from the host contract and will form part of the term

portfolio.

Contracts that have a legal form of insurance but do not transfer significant insurance

risk and expose the Group to financial risk are classified as investment contracts, and

they follow financial instruments accounting under IFRS 9. Investment contracts

without DPF issued by the Group fall under this category.

A number of investment contracts contain a DPF. This feature entitles the holder to

receive, as a supplement to guaranteed benefits, additional benefits or bonuses:

– that are likely to be a significant portion of the total contractual benefits;

– whose amount or timing is contractually at the discretion of the Group; and

– that are based on realised and/or unrealised investment returns on underlying assets

held by the Group.

The Group also issues a ‘hybrid’ product which is a unit-linked product that gives

policyholders the possibility to initially allocate, and subsequently switch, a portion of

the premium to a ‘with-profits’ DPF holding as well as a unit-linked (investment

without DPF) holding. This product was deemed to fall within scope of IFRS 17 when

the policyholder allocates a percentage holding in the with-profits fund as at inception

or transition date. Furthermore, management concluded that the unit-linked component

of the product does not constitute a distinct investment component, given that both

elements of the ‘hybrid’ product cannot be measured and presented separately and are

interdependent on each other.

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(a)Definition and classification - continued

Since this product is primarily a unit-linked product with the option to hold a

percentage of the holding in the with-profits fund, management has determined that for

such a contract to be in scope of IFRS 17, it needs to hold a 5% level of significant

discretionary benefit.

Local statutory regulations and the terms and conditions of these contracts set out the

basis for the determination of the amounts on which the additional discretionary

benefits are based (the DPF eligible surplus), and within which the Group may exercise

its discretion as to the quantum and timing of their payment to contract holders, also

considering the advice of the Approved Actuary. The Group accounts for these

contracts under IFRS 17.

The Group assessed investment contracts that qualify as having direct participation

features as a result of the nature of their design (i.e. they are primarily investment

related contracts where the investment risk is substantially borne by the policyholder) to

ascertain whether or not they meet the VFA eligibility criteria.

IFRS 17 requires these criteria to be assessed at the individual contract level. The

Group assessed the criteria at the product level. The assessment is carried out based on

the Group's expectations at inception, and is not reassessed subsequently, unless the

product is modified.

The with-profits policies are ring fenced, meaning, a barrier clearly segregates the

policyholder assets participating in the fund from the shareholders’ ones. Therefore, the

pool of assets is clearly identifiable. The ‘underlying items’ in this case would be the

with-profits assets.

Investment contracts with direct participation features are viewed as creating an

obligation to pay policyholders an amount that is equal to the fair value of the

underlying items, less a variable fee for service. The variable fee comprises the amount

of the Group’s share of the fair value of the underlying items less the fulfilment cash

flows ('FCF') that do not vary based on the returns on underlying items. Therefore, on

an average probability-weighted basis, the Group considers that the amount it expects to

pay to policyholders comprises a substantial portion of the fair value returns on

underlying items.

The variability in cash flows is assessed over the duration of the insurance contracts and

on the basis of the average of the probability-weighted present value. The duration of

the contract takes into account all the cash flows in the contract boundary. The major

component of the liability (the present value of the future net cash outflows) is made up

of claims which vary substantially with the underlying items.

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(a)Definition and classification - continued

In the normal course of business, the Group uses reinsurance to mitigate its risk

exposures. A reinsurance contract transfers significant risk if it transfers substantially

all of the insurance risk resulting from the insured portion of the underlying insurance

contracts, even if it does not expose the reinsurer to the possibility of a significant loss.

For short-term insurance contracts, the Group uses the PAA simplified method to

measure groups of contracts. All short-term insurance contracts originated by the

Group, are without direct participation features.

All references to insurance contracts in these consolidated financial statements apply to

insurance contracts issued or acquired, reinsurance contracts held and investment

contracts with DPF, unless specifically stated otherwise.

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(b) Unit of account

The Group manages insurance contracts issued by product type, where each product

type includes contracts which are subject to similar risks and are managed together. The

Group has determined that contracts have similar risk and are managed together if they

are priced together, have the same underwriting process, have common reporting, and

claims and risks underlying the contracts are managed together. All insurance contracts

of the same product type represent a portfolio. Each portfolio is further disaggregated

into groups of contracts that are issued within a calendar year (annual cohorts) and are

at initial recognition:

– contracts that are onerous; or

– all remaining contracts.

In variation to the above, as further described below, in contrast with all other contracts

in scope of IFRS 17, investment contracts with DPF are not grouped by annual cohort.

As per Article 2 of the Commission Regulation (EU) 2021/2036 (the ‘Regulation’), a

Group may choose not to apply the annual cohorting requirement to groups of

investment contracts with discretionary participation features and with cash flows that

affect or are affected by cash flows to policyholders of other contracts.

The Group’s with-profits fund is a pool of policies sharing in the same pool of

underlying items. Therefore, the risk that a particular policy becomes onerous (i.e. the

possibility of the with-profits fund assets being lower than the present value of its future

liabilities) is shared between the policyholders within this pool. In such instances,

policies, which do not exhibit such onerosity, will make good for those policies which

are onerous.

Given that the Group’s with-profits fund has all mutualisation features described above,

the Group has chosen to apply the option to avoid allocating policies to annual cohorts

as per the Regulation as these are groups of investment contracts with DPF and with

cash flows that affect or are affected by cash flows to policyholders of other contracts.

All with-profits and hybrid policies will therefore be allocated to a single cohort.

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(b) Unit of account - continued

Portfolios of reinsurance contracts held are assessed for aggregation separately from

portfolios of insurance contracts issued. Separate portfolios for reinsurance contracts

held were therefore established and the Group has a number of reinsurance portfolios.

In groups of reinsurance contracts held, the amount an entity pays generally exceeds the

expected present value of the cash flows generated by that reinsurance contract plus the

risk adjustment for non-financial risk and thus the Group is usually in a net cost

position. The Group has determined that the reinsurance contracts held will be grouped

by calendar or underwriting year (annual cohorts) depending whether they are loss

occurring or risk attaching under the category ‘all remaining contracts’ which includes

reinsurance contracts held with an initial net cost but with a possibility of a future net

gain.

Transition approaches that were applied by the Group on adoption of IFRS 17 with

respect to contracts aggregation requirements are included in Note 2.20.

Before the Group accounts for an insurance contract based on the guidance in IFRS 17,

it analyses whether the contract contains components that should be separated. IFRS 17

distinguishes three categories of components that have to be accounted for separately:

- cash flows relating to embedded derivatives that are required to be separated;

- cash flows relating to distinct investment components; and

- promises to transfer distinct goods or distinct services other than insurance contract

services.

The Group applies IFRS 17 to all remaining components of the contract. The Group

does not have any contracts that require further separation (except for term riders – refer

to note 2.10(a). The Group also does not have any contracts that require combination.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

Recognition

Groups of insurance contracts issued are initially recognised from the earliest of the

following:

- the beginning of the coverage period;

- the date when the first payment from the policyholder is due or actually received, if

there is no due date; and

- when the Group determines that a group of contracts becomes onerous.

Investment contracts with DPF are initially recognised at the date when the Group

becomes a party to the contract.

Reinsurance contracts held are recognised from the later of the following:

- the beginning of the coverage period of the group; and

- the initial recognition of any underlying insurance contract;

Unless the Group entered into the reinsurance contract held at or before the date when

an onerous group of underlying contracts is recognised prior to the beginning of the

coverage period of the group of reinsurance contracts held, in which case the

reinsurance contract held is recognised at the same time as the group of underlying

insurance contracts is recognised.

Only contracts that individually meet the recognition criteria by the end of the reporting

period are included in the groups. When contracts meet the recognition criteria in the

groups after the reporting date, they are added to the groups in the reporting period in

which they meet the recognition criteria, subject to the annual cohorts restriction.

Composition of the groups is not reassessed in subsequent periods.

Modification and derecognition

An insurance contract is derecognised when it is extinguished (that is, when the

obligation specified in the insurance contract expires or is discharged or cancelled), or

when the contractual terms are modified in a way that would have changed the

accounting for the contract significantly had the new terms always existed, in which

case a new insurance contract is recognised.

If a contract modification is not significant, the changes in cash flows caused by the

modification are treated as changes in estimates of FCF.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

Modification and derecognition - continued

When an insurance contract is derecognised from within a group of insurance contracts, the

Group:

– adjusts the FCF to eliminate the present value of future cash flows and risk adjustment

for non-financial risk relating to the rights and obligations removed from the group;

– adjusts the CSM; and

– adjusts the number of coverage units for the expected remaining insurance contract

services, to reflect the number of coverage units removed.

On the other hand, when an insurance contract accounted for under the PAA is

derecognised, adjustments to the future cash flows to remove related rights and

obligations to account for the effect of the derecognition result in the following amounts

being charged immediately to profit or loss:

a. if the contract is extinguished, any net difference between the derecognised part of

the Liability for Remaining Coverage (LRC) of the original contract and any other

cash flows arising from extinguishment.

b. if the contract is transferred to the third party, any net difference between the

derecognised part of the LRC of the original contract and the premium charged by

the third party; or

c. if the original contract is modified resulting in its derecognition, any net difference

between the derecognised part of the LRC and the hypothetical premium that the

entity would have charged if it had entered into a contract with equivalent terms as

the new contract at the date of the contract modification, less any additional

premium charged for the modification.

(d)Measurement

Fulfilment cash flows

Fulfilment cash flows (‘FCF’) are the current estimates of the future cash flows within

the contract boundary of a group of contracts that the Group expects to collect from

premiums and pay out for claims, benefits and expenses, adjusted to reflect the timing

and the uncertainty of those amounts.

Estimates of future cash flows:

a. are based on a probability-weighted mean of all possible outcomes;

b. are reflective of the Group’s perspective, provided estimates of any relevant market

variables are consistent with observable market prices for those variables; and

c. are reflective of conditions existing at measurement date.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Fulfilment cash flows - continued

An explicit risk adjustment for non-financial risk is estimated separately from the other

estimates for Assets for Remaining Coverages ('ARC') and Liability for Remaining

Coverage ('LRC'). For contracts measured under the PAA, unless the contracts are

onerous, the explicit risk adjustment for non-financial risk is only estimated for the

measurement of the Liability for Incurred Claims ('LIC').

The estimates of future cash flows are also adjusted using current discount rates to

reflect the time value of money and financial risks relating to these cash flows. The

discount rates reflect the characteristics of the cash flows arising from the groups of

insurance contracts, including timing, currency and liquidity of cash flows. The

determination of the discount rate that reflects the characteristics of the cash flows and

liquidity characteristics of the insurance contracts requires judgement and estimation.

Risk of the Group’s non-performance is not included in the measurement of groups of

insurance contracts issued. In the measurement of reinsurance contracts held, the

probability-weighted estimates of the present value of future cash flows include the

potential credit losses and other disputes of the reinsurer to reflect the non-performance

risk of the reinsurer.

The Group estimates certain FCF at the portfolio level or higher and then allocates such

estimates to groups of contracts.

The Group uses consistent assumptions to measure the estimates of the present value of

future cash flows for the group of reinsurance contracts held and such estimates for the

groups of underlying insurance contracts.

Contract boundary

The Group uses the concept of contract boundary to determine what cash flows should

be considered in the measurement of groups of insurance contracts.

Cash flows are within the boundary of an insurance contract if they arise from

substantive rights and obligations that exist during the reporting period in which the

Group can compel the policyholder to pay the premiums or in which the Group has a

substantive obligation to provide the policyholder with insurance contract services.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contract boundary - continued

A substantive obligation lasts until:

a) the Group has the practical ability to reassess the risks of a particular policyholder,

and hence, can set a price to fully reflect those risks; or

b) both of the following criteria are satisfied:

i. the Group has a practical ability to reassess the risks of the portfolio of insurance

contracts, as a result of which it can set a price to fully reflect those risks; and

ii. the pricing of premiums up to the date when the risks are reassessed does not take

into account the risks that relate to periods after the reassessment date.

In assessing the practical ability to reprice, risks transferred from the policyholder to the

Group, such as insurance risk and financial risk, are considered; other risks, such as

lapse or surrender and expense risk, are not included.

For contracts issued under the PAA, riders, representing add-on provisions to a basic

insurance policy that provide additional benefits to the policyholder at additional cost,

that are issued together with the main insurance contracts form part of a single

insurance contract with all the cash flows within its boundary.

Cash flows outside the insurance contracts boundary relate to future insurance contracts

and are recognised when those contracts meet the recognition criteria.

Cash flows are within the boundaries of investment contracts with DPF if they result

from a substantive obligation of the Group to deliver cash at a present or future date.

For groups of reinsurance contracts held, cash flows are within the contract boundary if

they arise from substantive rights and obligations of the Group that exist during the

reporting period in which the Group is compelled to pay amounts to the reinsurer or in

which the Group has a substantive right to receive insurance contract services from the

reinsurer.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contract boundary - continued

The Group's quota share, surplus and facultative reinsurance contracts have an annual

term and cover underlying contracts issued within the term on a risk-attaching basis.

Meaning that they cover policies ceded for the entire duration of the contract, even if

this duration exceeds that of the reinsurance contract itself. The Group treats such

reinsurance contracts as a series of annual contracts that cover underlying business

issued within a year. Estimates of future cash flows arising from all underlying

contracts issued and expected to be issued within the reinsurance contracts’ one-year

boundary are included in the measurement of the reinsurance contracts.

The excess of loss contracts held provide coverage for claims incurred during an

accident year. Thus, all cash flows arising from claims incurred and expected to be

incurred in the accident year are included in the measurement of the reinsurance

contracts held. Some of these contracts include mandatory reinstatement reinsurance

premiums, which are included within the respective reinsurance contracts’ boundaries.

Cash flows that are not directly attributable to a portfolio of insurance contracts are

recognised in other operating expenses as incurred.

Insurance acquisition costs

Insurance acquisition cash flows are cash flows arising from the costs of selling,

underwriting and starting a group of insurance contracts that are directly attributable to

the portfolio of insurance contracts to which the group belongs. Insurance acquisition

cash flows for the Group comprise commission paid to intermediaries for new business

and salaries of employees whose efforts are directly related to the acquisition of new

insurance business.

Insurance acquisition cash flows that are directly attributable to a group of insurance

contracts shall be allocated to that group.

Insurance acquisition cash flows not directly attributable to a group of contracts but

directly attributable to a portfolio of contracts are allocated to groups of contracts in the

portfolio.

The Group does not incur any material directly attributable acquisition cash flows, or

other inflows or outflows, before a group of insurance contracts is recognised.

Consequently, it does not recognise any ‘pre-recognition cash flows’.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Risk adjustment for non-financial risk

The risk adjustment for non-financial risk is applied to the present value of the

estimated future cash flows, and it reflects the compensation that the Group requires for

bearing the uncertainty about the amount and timing of the cash flows from non-

financial risk as the Group fulfils insurance contracts.

For reinsurance contracts held, the risk adjustment for non-financial risk represents the

amount of risk being transferred by the Group to the reinsurer.

Methods and assumptions used to determine the risk adjustment for non-financial risks

are discussed in Note 24.

Contracts not measured under the PAA

Initial measurement and CSM

The CSM is a component of the carrying amount of the asset or liability for a group of

insurance contracts issued representing the unearned profit that the Group will

recognise as it provides insurance contract services in the future. At initial recognition,

the CSM is an amount that results in no income or expenses arising from:

- the initial recognition of the FCF;

- cash flows arising from the contracts in the group at that date;

When the above calculation results in a net outflow, the group of insurance contracts

would be onerous. A loss arising from onerous insurance contracts is recognised

immediately in profit or loss, with no CSM recognised in the statement of financial

position and a loss component is established in the amount of loss recognised.

No onerous contracts have been identified by the Group.

For groups of reinsurance contracts held, any net gain or loss at initial recognition is

recognised as the CSM unless the net cost of purchasing reinsurance relates to past

events, in which case the Group recognises the net cost immediately in profit or loss.

For reinsurance contracts held, the CSM represents a deferred gain or loss that the

Group will recognise as a reinsurance expense as it receives insurance contract services

from the reinsurer in the future.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts not measured under the PAA - continued

Subsequent measurement

The carrying amount at the end of each reporting period of a group of insurance contracts

issued is the sum of:

– the LRC, comprising:

– the FCF related to future service allocated to the group at that date; and

– the CSM of the group at that date; and

– the liability for incurred claims ('LIC'), comprising the FCF related to past service

allocated to the group at the reporting date.

The carrying amount at the end of each reporting period of a group of reinsurance contracts

held is the sum of:

– the remaining coverage, comprising:

– the FCF related to future service allocated to the group at that date; and

– the CSM of the group at that date; and

– the incurred claims, comprising the FCF related to past service allocated to the group at

the reporting date.

i. Changes in fulfilment cash flows

The FCF are updated by the Group for current assumptions at the end of every reporting

period, using the current estimates of the amount, timing and uncertainty of future cash

flows and of discount rates.

The way in which the changes in estimates of the FCF are treated depends on which

estimate is being updated:

– changes that relate to current or past service are recognised in profit or loss; and

– changes that relate to future service are recognised by adjusting the CSM or the loss

component within the LRC as per the policy below.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts not measured under the PAA - continued

Subsequent measurement - continued

i. Changes in fulfilment cash flows - continued

For insurance contracts measured under the General Measurement Model (‘GMM’), the

following adjustments relate to future service and thus adjust the CSM:

a. experience adjustments – arising from premiums received in the period that relate to

future service and related cash flows such as insurance acquisition cash flows and

premium-based taxes;

b. changes in estimates of the present value of future cash flows in the LRC, except

those described in the following paragraph;

c. differences between any investment component expected to become payable in the

period and the actual investment component that becomes payable in the period; and

d. changes in the risk adjustment for non-financial risk that relate to future service.

Adjustments a. and b. above are measured using discount rates determined on initial

recognition (the locked in discount rates).

For insurance contracts under the GMM, the following adjustments do not adjust the

CSM:

a. changes in the FCF for the effect of the time value of money and the effect of

financial risk and changes thereof;

b. changes in the FCF relating to the LIC;

c. experience adjustments arising from premiums received in the period that do not

relate to future service and related cash flows; and

d. experience adjustments relating to insurance service expenses (excluding insurance

acquisition cash flows).

When measuring a group of investment contracts with DPF, the Group adjusts the

fulfilment cash flows for the whole of the changes in the obligation to pay policyholders

an amount equal to the fair value of the underlying items. These changes do not relate

to future services and are recognised in profit or loss. The Group then adjusts any CSM

for changes in the amount of the Group’s share of the fair value of the underlying items,

which relate to future services, as explained below.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts not measured under the PAA - continued

Subsequent measurement - continued

i. Changes in fulfilment cash flows - continued

For contracts measured under the VFA, the following adjustments relate to future

service and thus adjust the CSM:

– changes in the amount of the Group’s share of the fair value of the underlying

items; and

– changes in the FCF that do not vary based on the returns of underlying items:

a. changes in the effect of the time value of money and financial risks including the

effect of financial guarantees;

b. experience adjustments arising from premiums received in the period that relate to

future service and related cash flows, such as insurance acquisition cash flows and

premium-based taxes;

c. changes in estimates of the present value of future cash flows in the LRC, except

those described in the following paragraph;

d.differences between any investment component expected to become payable in the

period and the actual investment component that becomes payable in the period;

and

e. changes in the risk adjustment for non-financial risk that relate to future service.

Adjustments b. to e. are measured using the current discount rates.

For contracts under the VFA, the following adjustments do not adjust the CSM:

– changes in the obligation to pay the policyholder the amount equal to the fair value

of the underlying items;

– changes in the FCF that do not vary based on the returns of underlying items:

– changes in the FCF relating to the LIC; and

– experience adjustments arising from premiums received in the period that do not

relate to future service and related cash flows, such as insurance acquisition cash

flows and premium-based taxes; and

– experience adjustments relating to insurance service expenses (excluding

insurance acquisition cash flows)

The Group does not have any products with complex guarantees and does not use

derivatives as economic hedges of the risks.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts not measured under the PAA - continued

Subsequent measurement - continued

ii Changes to the contractual service margin

For insurance contracts issued, at the end of each reporting period the carrying amount

of the CSM is adjusted by the Group to reflect the effect of the following changes:

a. The effect of any new contracts added to the group.

b. For contracts measured under the GMM, interest accreted on the carrying amount of

the CSM.

c. Changes in the FCF relating to future service are recognised by adjusting the CSM.

Changes in the FCF are recognised in the CSM to the extent that the CSM is

available. When an increase in the FCF exceeds the carrying amount of the CSM,

the CSM is reduced to zero, the excess is recognised in insurance service expenses

and a loss component is recognised within the LRC. When the CSM is zero,

changes in the FCF adjust the loss component within the LRC with correspondence

to insurance service expenses. The excess of any decrease in the FCF over the loss

component reduces the loss component to zero and reinstates the CSM.

d. The effect of any currency exchange differences.

e. The amount recognised as insurance revenue for insurance contract services

provided during the period, determined after all other adjustments above.

For a group of reinsurance contracts held, the carrying amount of the CSM at the end of

each reporting period is adjusted to reflect changes in the FCF in the same manner as a

group of underlying insurance contracts issued.

iii. Interest accretion on the CSM

Under the GMM, interest is accreted on the CSM using discount rates determined at

initial recognition that are applied to nominal cash flows that do not vary based on the

returns of underlying items. The Group uses the discount curves at the middle of each

quarter during the year. MMSV will be assuming equal weighting per quarter given the

stability of new business written.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts not measured under the PAA - continued

Subsequent measurement - continued

iv. Adjusting the CSM for changes in the FCF relating to future service

The CSM is adjusted for changes in the FCF, measured applying the discount rates as

specified in the Changes in fulfilment cash flows section above.

v. Release of the CSM to profit or loss

The amount of the CSM recognised in profit or loss for insurance contract services in

the period is determined by the allocation of the CSM remaining at the end of the

reporting period over the current and remaining expected coverage period of the group

of insurance contracts based on coverage units.

The coverage period is defined as a period during which the entity provides insurance

contract services. Insurance contract services include coverage for an insured event

(insurance coverage), the generation of an investment return for the policyholder, if

applicable (investment-return service) for the contracts under the GMM, and the

management of underlying items on behalf of the policyholder (investment-related

service) for the contracts under the VFA. The period of investment-return service or

investment-related service ends at or before the date when all amounts due to current

policyholders relating to those services have been paid. Investment-return services are

provided only when an investment component exists in insurance contracts or the

policyholder has a right to withdraw an amount, and the Group expects these amounts

to include an investment return that is achieved by the Group by performing investment

activities to generate that investment return.

For contracts issued, the Group determines the coverage period for the CSM

recognition as follows:

- for investment contracts with DPF (including hybrids), the coverage period

corresponds to the period in which investment-return services are expected to be

provided; and

- for term life risk contracts, no investment-return services are provided and, thus, the

coverage period is determined by insurance coverage;

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts not measured under the PAA - continued

Subsequent measurement - continued

v. Release of the CSM to profit or loss - continued

The total number of coverage units in a group is the quantity of service provided by the

contracts in the group over the expected coverage period. The coverage units are

determined at each reporting period-end prospectively by considering:

– the quantity of benefits provided by contracts in the group;

– the expected coverage period of contracts in the group; and

– the likelihood of insured events occurring, only to the extent that they affect the

expected coverage period of contracts in the group.

The Group determines coverage units as follows:

– for term life insurance contracts, coverage units are determined based on the

policies’ face values that are equal to the fixed death benefit amounts in force;

– for investment contracts with DPF, including with-profits and unit-linked hybrids,

coverage units are based on fund assets and value of the fund.

The Group does not reflect the time value of money in the allocation of the CSM to

coverage units.

For reinsurance contracts held, the CSM is released to profit or loss as insurance

contract services are received from the reinsurer in the period.

Coverage units for the proportionate term life reinsurance contracts held are based on

the insurance coverage provided by the reinsurer, and they are determined by the ceded

policies’ fixed face values in force, taking into account new business projected within

the reinsurance contract boundary.

The coverage period for these contracts is determined based on the coverage period of

all underlying contracts whose cash flows are included in the reinsurance contract

boundary.

2. Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts measured under the PAA

The Group uses the PAA for measuring contracts with a coverage period of one year or

less. In addition to the contracts with coverage of less than one year, the PAA can be

used for measurement of groups of contracts where the entity reasonably expects that

such a simplification would produce a measurement of the LRC that would not differ

materially from the one that would be produced by applying the GMM.

For insurance contracts issued, insurance acquisition cash flows allocated to a group are

deferred and recognised over the coverage period of contracts in a group.

For insurance contracts issued, on initial recognition, the Group measures the LRC at

the amount of premiums received, less any acquisition cash flows paid.

For reinsurance contracts held, on initial recognition, the Group measures the remaining

coverage at the amount of ceding premiums paid.

The carrying amount of a group of insurance contracts issued at the end of each

reporting period is the sum of:

a. the LRC; and

b. the LIC, comprising the FCF related to past service allocated to the group at the

reporting date.

The carrying amount of a group of reinsurance contracts held at the end of each

reporting period is the sum of:

a. the remaining coverage; and

b. the incurred claims, comprising the FCF related to past service allocated to the

group at the reporting date.

For insurance contracts issued, at each of the subsequent reporting dates, the LRC is:

a. increased for premiums received in the period;

b. decreased for insurance acquisition cash flows paid in the period;

c. decreased for the amounts of expected premium receipts recognised as insurance

revenue for the services provided in the period; and

d.increased for the amortisation of insurance acquisition cash flows in the period

recognised as insurance service expenses.

100

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(d)Measurement - continued

Contracts measured under the PAA - continued

For reinsurance contracts held, at each of the subsequent reporting dates, the remaining

coverage is:

a. increased for ceding premiums paid in the period;

b. decreased for the expected amounts of ceding premiums, net of reinsurance

commissions, recognised as reinsurance expenses for the services received in the

period.

The Group does not adjust the LRC for insurance contracts issued and the remaining

coverage for reinsurance contracts held for the effect of the time value of money,

because insurance premiums are due within the coverage period of contracts, which is

one year or less.

For contracts measured under the PAA, the LIC is measured similarly to the LIC’s

measurement under the GMM. Future cash flows are adjusted for the time value of

money, since insurance contracts issued by the Group and measured under the PAA

may have a settlement period of over one year.

If facts and circumstances indicate that a group of insurance contracts measured under

the PAA is onerous on initial recognition or becomes onerous subsequently, the

Company increases the carrying amount of the LRC by the loss component which is

determined by the percentage of onerosity as a function of the LRC for the remaining

period. Subsequently, the loss component is remeasured at each reporting date as the

change in the percentage of onerosity as a function of the LRC for the remaining period.

Movements in the loss component are recorded in the insurance service expenses.

Onerosity of a group of insurance contracts does not automatically indicate that a

reinsurance contract held, protecting such onerous underlying group of contracts will

result in a net gain at initial recognition. However, for reinsurance contract held for

which there is a net gain at initial recognition or becomes so subsequently, the carrying

amount of the asset for remaining coverage (ARC) for reinsurance contracts held

measured under the PAA is increased by the amount of loss-recovery component. The

loss-recovery component is calculated by multiplying the percentage of onerosity as a

function of reinsurance ARC for the remaining period. Movements in the loss-recovery

component are recorded in the net reinsurance expenses.

The Company does not have any reinsurance contracts held measured under the PAA

with underlying contracts measured under the GMM.

101

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held

- continued

(e) Amounts recognised in profit or loss

Insurance revenue

As the Group provides insurance contract services under the group of insurance

contracts, it reduces the LRC and recognises insurance revenue. The amount of

insurance revenue recognised in the reporting period depicts the transfer of promised

services at an amount that reflects the portion of consideration that the Group expects to

be entitled to in exchange for those services.

For contracts not measured under the PAA, insurance revenue comprises the following:

• Amounts relating to the changes in the LRC:

a. claims and other directly attributable expenses incurred in the period measured

at the amounts expected at the beginning of the period, excluding:

– amounts allocated to the loss component;

– repayments of investment components and policyholder rights to withdraw an

amount;

– amounts of transaction-based taxes collected in a fiduciary capacity; -

insurance acquisition expenses; and

– amounts related to the risk adjustment for non-financial risk (see (b));

b. changes in the risk adjustment for non-financial risk, excluding:

– changes included in insurance finance income (expenses);

– changes that relate to future coverage (which adjust the CSM); and

– amounts allocated to the loss component;

c. amounts of the CSM recognised for the services provided in the period;

d. experience adjustments – arising from premiums received in the period other

than those that relate to future service; and

e. other amounts.

• Insurance acquisition cash flows recovery is determined by allocating the portion of

premiums related to the recovery of those cash flows on the basis of the passage of

time over the expected coverage of a group of contracts.

For groups of insurance contracts measured under the PAA, the Group recognises

insurance revenue based on the passage of time over the coverage period of a group of

contracts.

102

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held -

continued

(e) Amounts recognised in profit or loss - continued

Insurance service expense

Insurance service expenses include the following:

a. incurred claims and benefits, excluding investment components;

b. other incurred directly attributable expenses;

c.insurance acquisition cash flows amortisation;

d. changes that relate to past service – changes in the FCF relating to the LIC; and

e. onerous contract losses or reversals of those losses.

For contracts measured under the PAA, amortisation of insurance acquisition cash

flows is based on the passage of time.

Other expenses that do not meet the above criteria are included as other operating

expenses in the consolidated statement of profit or loss.

Net income (expenses) from reinsurance contracts held

The Group presents financial performance of groups of reinsurance contracts held on a

net basis in net income (expenses) from reinsurance contracts held, comprising the

following amounts:

a. reinsurance expenses;

b. incurred claims recovery;

c. other incurred directly attributable expenses;

d. changes that relate to past service i.e. changes in the FCF relating to incurred

claims recovery; and

e. effect of changes in the risk of reinsurers’ non-performance.

Reinsurance expenses are recognised similarly to insurance revenue. The amount of

reinsurance expenses recognised in the reporting period depicts the transfer of received

insurance contract services at an amount that reflects the portion of ceding premiums

that the Group expects to pay in exchange for those services.

103

2.Accounting policies - continued

2.10Insurance and investment contracts issued and reinsurance contracts held -

continued

(e)Amounts recognised in profit or loss - continued

Net income (expenses) from reinsurance contracts held - continued

For contracts not measured under PAA, reinsurance expenses comprise the following

amounts relating to the changes in the remaining coverage:

a. claims and other directly attributable expenses recovery in the period, measured at

the amounts expected to be incurred at the beginning of the period, excluding

amounts related to the risk adjustment for non-financial risk (see (b));

b. changes in the risk adjustment for non-financial risk, excluding:

– changes included in finance income (expenses) from reinsurance contracts held;

and

– changes that relate to future coverage (which adjust the CSM);

c. amounts of the CSM recognised for the services received in the period; and

d. experience adjustments arising from premiums paid in the period other than those

relating to future service.

For groups of reinsurance contracts held measured under the PAA, the Group

recognises reinsurance expenses based on the passage of time over the coverage period

of a group of contracts.

Ceding commissions that are not contingent on claims of the underlying contracts issued

reduce ceding premiums and are accounted for as part of reinsurance expenses. Ceding

commissions that are contingent on claims of the underlying contracts issued reduce

incurred claims recovery.

104

2.Accounting policies - continued

2.10Insurance and investment contracts - continued

(e)Amounts recognised in profit or loss - continued

Insurance finance income or expenses

Insurance finance income or expenses comprise the change in the carrying amount of

the group of insurance contracts arising from:

a. the effect of the time value of money and changes in the time value of money; and

b. the effect of financial risk and changes in financial risk.

For contracts measured under the PAA, the main amounts within insurance finance

income or expenses are:

a. interest accreted on the LIC; and

b. the effect of changes in interest rates and other financial assumptions.

The Group disaggregates changes in the risk adjustment for non-financial risk between

insurance service result and insurance finance income or expenses.

For contracts measured under the GMM, the main amounts within insurance finance

income or expenses are:

a. interest accreted on the FCF and the CSM; and

b. the effect of changes in interest rates and other financial assumptions.

For contracts measured under the VFA, insurance finance income or expenses comprise

changes in the value of underlying items (excluding additions and withdrawals).

The Group has opted to include all its insurance finance income and expenses in profit

or loss for all of its insurance contracts. The Group does not issue insurance contracts

that generate cash flows in a foreign currency.

105

2.Accounting policies - continued

2.11Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in

the profit or loss account, except to the extent that it relates to items recognised in other

comprehensive income or directly in equity. The amount of current tax payable or

receivable is the best estimate of the tax amount expected to be paid or received that

reflects uncertainty related to income taxes, if any.

The current income tax charge is calculated on the basis of the tax laws enacted or

substantively enacted at the statement of financial position date in the countries where

the Company’s subsidiaries and associates operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to

situations in which applicable tax regulation is subject to interpretation and establishes

provision where appropriate.

Deferred income tax is recognised in respect of temporary differences arising between

the tax bases of assets and liabilities and their carrying amounts in the financial

statements. However, if the deferred income tax arises from initial recognition of an

asset or liability in a transaction other than a business combination that at the time of

the transaction affects neither accounting nor taxable profit or loss, it is not accounted

for. Deferred income tax is measured at the tax rates that are expected to be applied to

temporary differences when they reverse, using tax rates (and laws) that have been

enacted or substantively enacted at the reporting date and reflect uncertainty relating to

income taxes, if any. Deferred tax is expected to apply when the related deferred tax

asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that future taxable profit or taxable

capital gains will be available such that realisation of the related tax benefit is probable.

Deferred income tax is provided on temporary differences arising on investments in

subsidiaries and associates, except where the Group controls the timing of the reversal

of the temporary difference and it is probable that the temporary difference will not

reverse in the foreseeable future.

If the amount of taxable temporary differences is insufficient to recognise a deferred

tax asset in full, then future taxable profits, adjusted for reversals of existing temporary

differences are considered. Deferred tax assets are reviewed at each reporting date and

are reduced to the extent that it is no longer probable that the related tax benefit will be

realised; such reductions are reversed when the probability of future taxable profit

improves.

Deferred income tax assets and liabilities are offset when there is a legally enforceable

right to offset current tax assets against current tax liabilities and when the deferred

income tax assets and liabilities relate to income taxes levied by the same taxation

authority on either the same taxable entity or different taxable entities where there is an

intention to settle the balance on a net basis.

106

2.Accounting policies - continued

2.11Current and deferred income tax - continued

Deferred tax related to fair value re-measurements charged or credited directly in other

comprehensive income or to equity, is also credited or charged directly to equity and

subsequently recognised in the profit or loss account together with the deferred gain or loss.

2.12Provisions for pension obligations

Provisions are recognised when the Group has a present legal or constructive obligation as

a result of past events, it is probable that an outflow of resources will be required to settle

the obligation, and a reliable estimate of the amount can be made.

A defined benefit plan defines an amount of pension that an employee will receive on

retirement. In the Group’s case, this amount is dependent upon an employee’s final

compensation upon retirement.

The liability recognised in the statement of financial position is the present value of the

defined benefit obligation at the end of the reporting period. The present value of a defined

benefit obligation is determined by discounting the estimated future cash outflows using

interest rate yields of government or high-quality corporate bonds that are denominated in

the currency in which the benefits will be paid, and that have terms to maturity

approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in assumptions

are charged or credited to other comprehensive income in the period in which they arise.

2.13 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of

services in the ordinary course of the Group’s activities. The Group recognises revenue

when the amount of revenue can be reliably measured, it is probable that future economic

benefits will flow to the entity and when specific criteria have been met as described

below.

Rendering of services

Insurance revenue recognition is described in Note 2.10 dealing with insurance contracts

and investment contracts with DPF.

Revenue arising from the issue of investment contracts without DPF and other related

services offered by the Group, is recognised in the accounting period in which the services

are rendered.

Fees include investment management fees arising from services rendered in conjunction

with the issue and management of investment contracts where the Group actively manages

the consideration received from its customers to fund a return that is based on the

investment profile that the customer selected on origination of the instrument. The Group

recognises these fees on a straight-line basis over the estimated life of the contract.

107

2.Accounting policies - continued

2.13 Revenue recognition - continued

Rendering of services - continued

The Group charges its customers for management and other related services using the

following different approaches:

– Front-end fees are charged to the client on inception. The consideration received is

deferred as a liability and recognised over the life of the contract on a straight-line

basis.

– Regular fees are charged to the customer periodically (monthly, quarterly, half

yearly or annually) either directly or by making a deduction from invested funds.

Regular charges billed in advance are recognised on a straight-line basis over the

billing period.

Other revenue receivable by the Group mainly comprises commission or trailer fees

receivable on account of investment or other services provided in an intermediary

capacity which is accounted for on an accruals basis.

2.14Investment return

Investment return includes dividend income, net gains or losses on financial assets at

fair value through profit or loss, interest income from financial assets not classified as

fair value through profit or loss, rental income receivable, share of associated

undertaking’s result, and other fair value movements of investment properties, and is

net of other investment expenses.

(a) Dividend income

Dividend income from group undertakings is recognised in the profit or loss account as

part of investment income when the right to receive payment is established.

(b) Net fair value gains/(losses) from financial assets at fair value through profit or

loss

This category includes gains or losses arising from changes in the fair value of the

financial assets at fair value through profit or loss in the year in which they arise,

dividend income recognised when the right to receive payment is established and

interest income received on financial assets at fair value through profit or loss.

Interest income from financial assets not classified as fair value through profit or loss is

recognised using the effective interest method.

108

2.Accounting policies - continued

2.14Investment return - continued

(d) Investment income from investment properties

Rental income from investment property is accounted for on an accruals basis in

accordance with the substance of the relevant lease agreements.

2.15Leases

At inception of a contract, the Group assess whether a contract is, or contains, a lease.

A contract is or contains a lease if the contract conveys the right to control the use of an

identified asset for a period of time in exchange for consideration. To assess whether a

contract conveys the right to control the use of an identified asset, the Group uses the

definition of a lease in IFRS 16.

At commencement or on modification of a contract that contains a lease component, the

Group allocates the consideration in the contract to each lease component on the basis

of its relative stand-alone price.

(a) As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is a

finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease

transfers substantially all of the risks and rewards incidental to ownership of the

underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an

operating lease. As part of this assessment, the Group considers certain indicators such

as whether the lease is for the major part of the economic life of the asset.

The Group recognises lease payments received under operating leases as income on a

straight-line basis over the lease term as part of ‘other income’ – Note 9.

(b) As a lessee

A lessee recognises a right-of-use asset representing its right to use the underlying asset

and a lease liability representing its obligation to make lease payments. As described

later in this note there are recognition exemptions for short-term leases and leases of

low-value items.

The Group recognises a right-of-use asset and a lease liability at the lease

commencement date. The right-of-use asset is initially measured at cost, which

comprises the initial amount of the lease liability adjusted for any lease payments made

at or before the commencement date, plus any initial direct costs incurred and an

estimate of costs to dismantle and remove the underlying asset or to restore the

underlying asset or the site on which it is located, less any lease incentives received.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

109

2.Accounting policies - continued

2.15Leases - continued

(b) As a lessee - continued

The right-of-use asset is subsequently depreciated using the straight-line method from

the commencement date to the end of the lease term, unless the lease transfers

ownership of the underlying asset of the Group by the end of the lease term or the cost

of the right-of-use asset reflects that the Group will exercise a purchase option. In that

case the right-of-use asset will be depreciated over the useful life of the underlying

asset, which is determined on the same basis as those of property and equipment. In

addition, the right-of-use asset is periodically reduced by impairment losses, if any, and

adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that

are not paid at the commencement date, discounted using the interest rate implicit in the

lease or, if that rate cannot be readily determined, the Group’s incremental borrowing

rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by using interest rate curves by

country and termination dates, coordinated in a centralized manner, in which the

interest rate calculation is obtained by adding the differential related to the asset’s

nature. Interest rate curves are reviewed twice a year.

Lease payments included in the measurement of the lease liability comprise the

following:

– fixed payments (including payments which are essentially fixed), minus any

incentive to lease to be paid;

– the price for exercising a purchase option which the lessee is reasonably certain to

exercise; and

– payments for early cancellation.

The lease liability is measured at amortised cost using the effective interest method. It is

remeasured when there is a change in future lease payments arising from a change in

rate, if there is a change in the Group’s estimate of the amount expected to be payable

under a residual value guarantee, if the Group changes its assessment of whether it will

exercise a purchase, extension or termination option or if there is a revised in-substance

fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made

to the carrying amount of the right-of-use asset or is recorded in profit or loss if the

carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use asset that do not meet the definition of investment

property in ‘Right-of-use assets’.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

110

2.Accounting policies - continued

2.15Leases - continued

(b) As a lessee - continued

The Group has elected not to recognise right-of-use assets and lease liabilities for leases

of low-value assets and short-term leases. The Group recognises the lease payments

associated with these leases as an expense on a straight-line basis over the lease term.

A lease modification is defined as a change in the scope of a lease, or the consideration

for a lease, that was not part of the original terms and conditions of the lease. A lease

modification includes adding or terminating the right to use one or more underlying

assets, or extending or shortening the contractual lease term.

A lease modification is accounted for in one of two ways;

• It is treated as a separate lease; or

• It is not treated as a separate lease.

A modification will only be treated as a separate lease if it involves the addition of one

or more underlying assets at a price that is commensurate with the standalone price of

the increase in scope. All other modifications are not treated as a separate lease.

Modifications, taking place during 2023 include changes in lease consideration and

extension of lease term all of which do not constitute a separate lease.

2.16Impairment of non-financial assets

Assets that have an indefinite useful life and are not subject to amortisation, or assets not yet

available for use, are tested annually for impairment. Assets that are subject to amortisation

or depreciation are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount may not be recoverable. An impairment loss is recognised

for the amount by which the asset’s carrying amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which

there are separately identifiable and independent cash flows (cash-generating units).

2.17Offsetting

Financial assets and liabilities are offset and the net amount reported in the statement of

financial position when, and only when the Group currently has a legally enforceable right to

set-off the recognised amounts and it intends to settle them on a net basis, or to realise the

asset and settle the liability simultaneously. Income and expenses are presented on a net basis

only when it is required or permitted by a standard – e.g. gains and losses arising from a

group of similar transactions such as the gains and losses on financial assets measured at

FVTPL.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

111

2.Accounting policies - continued

2.18Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the

period in which an obligation to pay a dividend is established.

2.19Share capital

Shares are classified as equity when there is no obligation to transfer cash or other

assets. Incremental costs directly attributable to the issue of new shares are shown in

equity as a deduction from the proceeds net of tax.

2.20 Methods and judgements applied in determining the IFRS 17 transition amounts

At 1 January 2022, the Group applied the following approaches to identify and measure

certain groups of contracts on transition to IFRS 17.


Year of issue of contracts	Transition approach
Short-term non-life and life	Full retrospective approach
After 2016 – term business including reinsurance	Full retrospective approach
Before 2016 – term business including reinsurance	Fair value approach
All with-profits and unit-linked business	Fair value approach

The transition approach was determined at the level of a group of insurance contracts

and affected the approach to calculating the CSM on initial adoption of IFRS 17.

Full retrospective approach

The Group has applied the full retrospective approach on transition to all contracts

measured under the Premium Allocation Approach (PAA) albeit with some

simplifications.

The Group has determined that reasonable and supportable information was available

for all contracts in force at the transition date for the term portfolio and reinsurance

thereon that were issued after 1 January 2016. For these contracts, the Group had

enough data available to perform a reasonable calculation of the transitional value of

the CSM under FRA, albeit with some simplifications. The CSM at initial recognition

was based on initial assumptions when groups of contracts were recognised and rolled

forward to the date of transition as if IFRS 17 had always been applied.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

112

2.Accounting policies - continued

2.20 Methods and judgements applied in determining the IFRS 17 transition amounts -

continued

Full retrospective approach - continued

Accordingly, the Group has: identified, recognised and measured each group of

insurance contracts in this category as if IFRS 17 had always applied ; derecognised any

existing balances that would not exist if IFRS 17 had always applied; and recognised

any resulting net difference in equity.

Fair value approach

The Group applied judgement in determining the transition amounts and the pre-

transition FCF and experience were not considered under this approach.

The Group was required to comply with Solvency II requirements in 2016. Prior to

2016, it was impracticable to obtain realistic cash flow data without the use of

hindsight. Thus, the Group could not obtain the necessary reasonable and supportable

information to apply the FRA for the term cohorts pre-2016, thus the fair value

approach was applied to these cohorts.

Further, given the mechanics of the Group's with-profits fund (which have changed

over time) regarding the sharing of surpluses and cost of guarantees throughout the

different generations in the portfolio at a particular time, applying FRA as if IFRS 17

always applied was impracticable.

Applying the fair value approach, the Group determined the CSM to be the difference

between the fair value of a group of insurance contracts, measured in accordance with

IFRS 13, ‘Fair Value Measurement’, and its FCF at the transition date.

The fair value of an insurance liability is the price that a market participant would be

willing to pay to assume the obligation and the remaining risks of the in force contracts

as at the transition date. A present value technique was used to value groups of

contracts.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

113

2. Accounting policies - continued

2.20 Methods and judgements applied in determining the IFRS 17 transition amounts -

continued

Fair value approach - continued

In estimating the fair value of groups of insurance contracts, the following

considerations were applied:

– only future cash flows within the boundaries of the insurance contracts were

included in the fair value estimation, excluding future renewals and new business

that would be outside the contract boundary of the contracts under IFRS 17;

– assumptions about expected future cash flows and risk allowances, including

operational risk were adjusted for the market participant’s view, as required by

IFRS 13;

– profit margins were included to reflect what a market participant would require for

accepting obligations under insurance contracts, beyond the risk adjustment for non-

financial risk; and

– diversification between market risk and life risk. Although market risk is considered

as a hedgeable risk, it was assumed that a buyer will be able to capture this

diversification from its other own modules.

3.Use of accounting estimates and judgements in applying accounting policies

The Group makes estimates and assumptions concerning the future. Estimates and

judgements are continually evaluated and are based on historical experience and other

factors, including expectations of future events that are believed to be reasonable under

the circumstances.

Information about judgements made in applying accounting policies that have the most

significant effects on the amounts recognised in the financial statements is included in

the following notes, which also include information about assumptions and

uncertainties at 31 December 2023 that have a significant risk of resulting in a material

adjustment in the carrying amounts of assets and liabilities in the next financial year.

(a) Long-term contracts - insurance contract assets, insurance contract liabilities and

reinsurance contract liabilities

Insurance contract assets, insurance contract liabilities and reinsurance contract

liabilities are subject to an annual valuation using generally accepted accounting and

actuarial practice.

Different principles and valuation methodologies are adopted depending on the type

and generation of products. The key assumptions used in determining the measurement

of insurance contract assets, insurance contract liabilities and reinsurance contract

liabilities are described in Note 24.6 to the financial statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

114

3.Use of accounting estimates and judgements in applying accounting policies -

continued

(b) Short-term insurance contracts under PAA - liability for incurred claims

Liability of incurred claims (LIC) of short-term business insurance contracts, measured

under the PAA, comprise of the estimates of future cash flows. The estimates of future

cash flows is derived using a standard actuarial claims projection technique, the Chain

Ladder method, other than for the claims reserves as explained below. The key

assumptions underlying this technique is that past claims development experience can

be used to project future claims development.

Claims reserves which are not projected using actuarial techniques, particularly those

involving fatalities and/or serious bodily injuries, are reserved at the case-by-case

reserve estimate. The measurement of claim payments due by the Group involves the

assessment of future settlements and is therefore dependent on assumptions around

determining such reserves based on, among others, legal precedent and current trends in

compensation awards.

More detail on the key assumptions used in determining the LIC in respect of short-

term insurance contracts under PAA are described in Note 24 to the financial

statements.

The Group considers that it controls MAPFRE MSV Life p.l.c. (‘MMSV’) even though

it does not own more than 50% of the voting rights. This is because strategic, operating

and financing policies of MMSV are directed by means of shareholders’ agreement

which provides MAPFRE Middlesea p.l.c. with the right to select, appoint and remove

the key management personnel of MMSV and approve its business plan and capital

expenditure.

For all the financial years up to 31 December 2010, MMSV was considered to be an

associate and was accounted for using the equity method. Following the shareholders’

agreement, on 29 July 2011, MAPFRE Middlesea p.l.c. acquired control over MMSV

based on the factors explained in this note and started consolidating MMSV as from

that date.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

115

4. Management of risk

The Group is a party to contracts that transfer insurance risk and/or financial risk. This

section summarises these risks and the way that the Group manages them.

The following table describes the composition of the underlying items for long-term

contracts with direct participation features:


Group	2023	2022
	€000s	€000s

Cash at bank and in hand	8,910	11,891
Deposits with banks or credit institutions	—	51,502
Debts securities	844,145	762,579
Equity securities and units in unit trusts	926,282	931,605
Assets held to cover linked liabilities - collective investment schemes	31,762	27,796
Investments in associated undertakings	24,508	23,809
Investment property	92,844	95,504
Foward foreign exchange contracts and swaps	1,970	2,698
Other assets	—	6,068


Total investment assets and cash and cash equivalents	1,930,421	1,913,452


Insurance contract liabilities	(1,984,889)	(1,961,452)

4.1Insurance risk

The risk under any one insurance contract is the possibility that the insured event occurs

and the uncertainty of the amount of the resulting claim. By the very nature of an

insurance contract, this risk is fortuitous, however, it can be predicted with a certain

disclosed level of reliability.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

116

4. Management of risk - continued

4.1Insurance risk

For a portfolio of insurance contracts where the theory of probability is applied to

pricing and provisioning, the principal risk that the Group faces under its insurance

contracts is that the actual claims and benefit payments are significantly different to the

amounts included within insurance/reinsurance contract liabilities and assets. This

could occur because the frequency or severity of claims and benefits are greater or

lower than estimated. Insurance events are fortuitous and the actual number and

amount of claims and benefits may vary from year to year from the estimate established

using statistical and actuarial techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller

the relative variability of the expected outcome will be. In addition, a more diversified

portfolio is less likely to be affected across the board by a change in any subset of the

portfolio. The Group has developed its insurance underwriting strategy to diversify the

type of insurance risk accepted and within each of these categories to achieve a

sufficiently large population of risks to reduce the potential variability of the expected

outcome. The objective of the underwriting strategy is to ensure that the underwritten

risks are well diversified in terms of type and amount of risk. The variability of risks is

improved by the careful selection and implementation of underwriting strategies, which

are designed to ensure that risks are diversified in terms of type of risk and level of

insured benefits.

Key risks arising from insurance contracts issued:


Contract	Key risks	Risk mitigation


Short-term contracts	Insurance risk – frequency and severity of claims	Underwriting strategy, adequate reinsurance arrangements and proactive claim handling
Life risk - Term	Mortality risk: death of policyholder earlier than expected	Reinsurance with financially strong reinsurer and adequate underwriting
Investment contracts with DPF	Market risk: investment return on underlying items falling below guaranteed minimum rates	Management discretion to determine amount and timing of policyholder bonus rates
	Interest rate risk: difference in duration and yield of assets and liabilities	Matching of asset and liability cash flows
Unit-linked	Lapse risk: insufficient charges to cover acquisition expenses	Surrender penalties and review of charges

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

117

4.Management of risk - continued

4.1Insurance risk - continued

Factors that aggravate insurance risk include lack of risk diversification in terms of type

and amount of risk and geographical location. The Group is largely exposed to

insurance risk in one geographical area, Malta and in one currency, the Euro.

(a) Short-term business insurance contracts

Frequency and severity of claims

The terms and conditions of the contracts set out the bases for the determination of the

Group’s liability should the insured event occur. The risks underwritten include motor

(including third party liability), health, fire and other damage to property, other classes

and group life. Details of insurance revenue as well as insurance service expenses

analysed by segment are provided in the “Segment information” (Note 7).

The frequency and severity of claims can be affected by several factors. The following

are considered by the Group to be the most significant:

-The increasing levels of court awards in cases where damages are suffered as a

result of injuries, the divergence of awards that is dependent on the territory of the

claim and the jurisdiction of the court, the effect of inflation due to the prolonged

period typically required to settle such cases; and

- The risk of a single event that can extensively affect a multiple of individual risks

to which the Group is exposed.

The Group manages these risks through its underwriting strategy, adequate reinsurance

arrangements and proactive claims handling.

The underwriting strategy ensures that the risks underwritten are well diversified in

terms of type and amount of risk. The Group follows strict underwriting guidelines and

sets limits on the overall retention of risk that it carries. Any risk in excess of this limit

is either reinsured under a facultative cover note or is declined. Underwriting limits are

in place to enforce appropriate risk selection criteria. In certain circumstances, certain

exclusions to risks are included within these guidelines. For example, the Group does

not insure US risks unless they are incidental. The Group can impose deductibles to

help manage its costs. It also uses its experience and expertise to mitigate the risk of

fraudulent claims. Insurance contracts also entitle the Group to pursue third parties for

payment of some or all of the costs (i.e. subrogation). A significant portion of the

Group’s business is underwritten through an agency distribution network.

Underwriting authority limits are set for individual agencies or branches, and any

contracts through which the Group is committed to cover risks in excess of these

authority limits require head office approval.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

118

4.Management of risk - continued

4.1Insurance risk - continued

(a) Short-term business insurance contracts - continued

Frequency and severity of claims - continued

The Group has reinsurance protection in place for all classes of business. The type of

reinsurance cover, and the level of retention, is based on the Group’s internal risk

management assessment which takes into account the risk being covered, the sums

assured and the geographical location of the risk. The Board approves each reinsurance

programme on an annual basis. The reinsurance arrangements include a mix of

proportional, facultative and non-proportional covers, which limit the liability of the

Group to any one individual claim or event. Generally, the Group’s policy is to place

reinsurance with listed multinational reinsurance companies whose credit rating is not

less than BBB. No rating limitation shall apply to treaty placements with MAPFRE Re

or any MAPFRE Group company designated to write any or all of the MAPFRE Group

Reinsurance treaties. At 31 December 2023, MAPFRE Re’s rating stood at A. The

Board monitors the security rating of MAPFRE on a periodic basis.

The Group has specialised claims units dealing with the mitigation of risks surrounding

known claims. These units investigate and adjust claims as appropriate. Claims are

individually reviewed regularly, and are adjusted to reflect the latest information on the

underlying facts, current law, jurisdiction, contractual terms and conditions and other

factors. The Group actively manages and pursues early settlement of claims to reduce

its exposure to unpredictable developments. Authority limits are set for the settlement

of claims through the individual agents. Any claims incurred above these limits are

referred to head office for handling. In addition, all claims involving bodily injury are

referred to head office irrespective of their amount.

Concentration of insurance risk

Up until 31 December 2023, 100% of the Group’s business was written in Malta (2022:

100%). The portfolio is diversified in terms of type of business written, with motor

business comprising 46% (2022: 46%) and health comprising 17% (2022: 17%) and fire

and other property damage 18% (2022: 18%) of the total portfolio (including Group

Life business). The remaining 19% (2022: 19%) of premium revenue is generated

across a spread of classes including marine, income protection, general liability, travel

and short-term group life. Further information on insurance revenue, and insurance

service expenses by insurance business class is provided in Note 7 to these financial

statements.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

119

4.Management of risk - continued

4.1Insurance risk - continued

(a) Short-term business insurance contracts - continued

Sources of uncertainty in the estimation of future claim developments and payments

Claims on contracts are accounted for on a claims-occurrence basis. The Group is

liable for all insured events that occurred during the term of the contract, even if the

loss is discovered after the end of the contract term. Certain classes of business, most

notably those exposed to liability, can take several years to develop and are therefore

subject to a greater degree of uncertainty than other classes of business which are

typically settled in a shorter period of time.

The estimated cost of claims includes direct expenses to be incurred in settling claims,

net of the expected subrogation value and recoveries. The Group takes all reasonable

steps to ensure that it has appropriate information regarding its claims exposures.

However, given the uncertainty in establishing the liability for incurred claims, it is

possible that the final outcome will prove to be different from the original liability

established.

In calculating the estimated cost of unpaid claims, the Group considers the results of

estimation techniques that are based partly on known information at year-end and partly

on statistical analysis of historical experience.

Further details on the process of estimation is provided in Note 24.2 which also presents

the development of the estimate of future cash flows for claims incurred in a given year.

Sensitivity analysis to underwriting risk variables

The following tables present information on how reasonably possible changes in

assumptions made by the Company with regard to underwriting risk variables impact

product line insurance liabilities and profit or loss and equity before and after risk

mitigation by reinsurance contracts held. The analysis is based on a 5% upwards and

downwards change in the ultimate loss amount while holding all other assumptions

constant. In practice, this is unlikely to occur, and changes in some of the assumptions

might be correlated.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

120

4.Management of risk - continued

4.1Insurance risk - continued

(a) Short-term business insurance contracts - continued

Sensitivity analysis to underwriting risk variables - continued


31 December 2023	Impact on profit before income tax		Impact on equity
	Gross	Net	Gross	Net
	€'000	€'000	€'000	€'000

Non-life
Ultimate loss – 5% increase	(427)	(379)	(278)	(246)
Ultimate loss – 5% decrease	427	379	278	246

31 December 2022	Impact on profit before income tax		Impact on equity
	Gross	Net	Gross	Net
	€'000	€'000	€'000	€'000
Non-life
Ultimate loss – 5% increase	(346)	(300)	(225)	(195)
Ultimate loss – 5% decrease	346	300	225	195

(b) Long term business insurance contracts

Frequency and severity of claims (Mortality risk)

For contracts where death is the insured risk, the most significant factor that could

increase the overall frequency of claims are epidemics or wide spread changes in

lifestyle resulting in earlier or more claims than expected.

At present these risks do not vary significantly in relation to the location of the risk

insured by the Group. However, undue concentration by amounts could have an impact

on the severity of benefit payments on a portfolio basis.

For contracts with fixed and guaranteed benefits and fixed future premiums, there are

no mitigating terms and conditions that reduce the insurance risk accepted. For

investment contracts with DPF, the participating nature of the contracts results in a

portion of the insurance risk being reduced over the term of policy. Investment

contracts with DPF carry negligible insurance risk.

The Group manages these risks through its underwriting strategy and reinsurance

arrangements. The underwriting strategy is intended to ensure that the risks

underwritten are well diversified in terms of type of risk and level of insured benefits.

Medical selection is also included in the Group’s underwriting procedures with

premiums varied to reflect the health condition and life expectancy of the applicants.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

121

4.Management of risk - continued

4.1Insurance risk - continued

(b) Long term business insurance contracts - continued

Frequency and severity of claims (Mortality risk) - continued

The Group has reinsurance protection in place to cover death claims. The type of

reinsurance cover and the level of retention for each risk are based on the Group’s

internal risk management assessment, which takes account of the nature of the risk

covered and the sum assured. The reinsurance programme is approved by the Board of

Directors ("the Board") annually. The reinsurance arrangements in place include a mix

of quota share, facultative, excess of loss and catastrophe protection, which limits the

liability of the Group to any one individual life or event. The Group’s reinsurance is

placed with listed multinational reinsurance companies whose rating is not less than A.

The mortality assumptions applied are disclosed in Note 24.

Policyholder lapse risk

Higher lapses than expected cause a loss of future profits and possibility of non-

recovery of sales expenses.

The amount of insurance risk is also subject to contract holder behaviour. On the

assumption that policyholders will make decisions rationally overall underwriting risk

can be assumed to be aggravated by such behaviour. For example, it is likely that

contract holders whose health has deteriorated significantly will be less inclined to

terminate contracts insuring death benefits than those contract holders remaining in

good health. This results in an increasing trend of expected mortality as the portfolio of

insurance contracts reduces due to voluntary terminations.

Unit-linked and with-profit policies issued, can be surrendered before maturity for a

cash surrender value specified in the contractual terms. Cash surrender value equals the

policyholder account/investment value at the time of termination, less any surrender

penalties. Through these penalties, policyholders are discouraged from surrendering

contracts earlier than policy maturity. As such, penalties mitigate the expense risk

arising from acquisition and other costs incurred when policies were issued, because

such costs were originally assumed to be spread over a longer period, since early

surrender was not expected.

The lapse assumptions applied are disclosed in Note 24.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

122

4.Management of risk - continued

4.1Insurance risk - continued

(b) Long term business insurance contracts - continued

Expense Risk

Expense risk is the risk of unexpected increases in policy maintenance, claim handling

and other costs relating to fulfilment of insurance contracts. The risk is managed

through budgeting and periodic cost evaluations. Investment contracts with DPF carry

negligible expense risk.

The expense assumptions applied are disclosed in Note 24.

Market Risk

The risk is covered in Note 4.2 (a) below. The investment assets return and discount

rate assumptions are disclosed in Note 24.

Sensitivity analysis to underwriting risk variables

The following tables present information on how reasonably possible changes in

assumptions made by the Group with regard to underwriting risk variables impact

product line insurance liabilities and profit or loss and equity before and after risk

mitigation by reinsurance contracts held. The analysis is based on a change in an

assumption while holding all other assumptions constant. In practice, this is unlikely to

occur, and changes in some of the assumptions might be correlated.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

123

4.Management of risk - continued

4.1Insurance risk - continued

(b) Long term business insurance contracts - continued

Sensitivity analysis to underwriting risk variables - continued


31 December 2023	Impact on CSM		Impact on profit before income tax		Impact on equity
	Gross	Net	Gross	Net	Gross	Net
	€'000	€'000	€'000	€'000	€'000	€'000
Life Risk (Net)
Mortality rate – 10% increase	(4,155)	(1,852)	(59)	(15)	(39)	(10)
Mortality rate – 10% decrease	4,151	1,854	57	14	37	9
Lapse rates – 10% increase	(1,775)	(288)	192	124	125	80
Lapse rates – 10% decrease	1,775	288	(192)	(124)	(125)	(80)
Expenses – 10% increase	(1,566)	(1,812)	(48)	(57)	(31)	(37)
Expenses – 10% decrease	1,566	1,812	48	57	31	37

Investment contracts with DPF
Mortality rate – 10% increase	(391)	(391)	3	3	2	2
Mortality rate – 10% decrease	391	391	(3)	(3)	(2)	(2)
Lapse rates – 10% increase	123	123	93	93	60	60
Lapse rates – 10% decrease	(178)	(178)	(89)	(89)	(58)	(58)
Expenses – 10% increase	(1,179)	(1,179)	(71)	(71)	(46)	(46)
Expenses – 10% decrease	1,179	1,179	71	71	46	46

31 December 2022	Impact on CSM		Impact on profit before tax		Impact on equity
	Gross	Net	Gross	Net	Gross	Net
	€'000	€'000	€'000	€'000	€'000	€'000
Life Risk (Net)
Mortality rate – 10% increase	(5,030)	(2,257)	589	279	383	182
Mortality rate – 10% decrease	5,030	2,257	(589)	(279)	(383)	(182)
Lapse rates – 10% increase	(1,413)	(103)	324	52	211	34
Lapse rates – 10% decrease	1,413	103	(324)	(52)	(211)	(34)
Expenses – 10% increase	(1,678)	(1,891)	130	145	85	95
Expenses – 10% decrease	1,678	1,891	(130)	(145)	(85)	(95)

Investment contracts with DPF
Mortality rate – 10% increase	(295)	(295)	(6)	(6)	(4)	(4)
Mortality rate – 10% decrease	295	295	6	6	4	4
Lapse rates – 10% increase	531	531	82	82	53	53
Lapse rates – 10% decrease	(531)	(531)	(82)	(82)	(53)	(53)
Expenses – 10% increase	(1,338)	(1,338)	(123)	(123)	(80)	(80)
Expenses – 10% decrease	1338	1338	123	123	80	80

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

124

4.Management of risk - continued

4.1Insurance risk - continued

Changes in underwriting risk variables mainly affect the CSM, profit or loss and equity

as follows.


	GMM	VFA


a. CSM	Changes in fulfilment cash flows, other than those recognised as insurance finance income or expenses	Changes in fulfilment cash flows
b. Profit or loss	Changes in fulfilment cash flows that are recognised as insurance finance income or expenses in profit or loss and change in CSM release and /or coverage units	Changes in CSM release and /or coverage units
c. Equity	The effect on profit or loss under (b) after tax	The effect on profit or loss under (b) after tax

4.2 Financial risk

The Group is exposed to financial risks through its financial assets, financial liabilities

and insurance contract assets and liabilities and reinsurance contracts assets and

liabilities. In particular, the key risk is that in the long term, the proceeds from its

financial assets are not sufficient to fund the obligations arising from its insurance and

investment contracts. The components of financial risks for the Group are market risk

(including cash flow and fair value interest rate risk, equity price risk and currency

risk), credit risk and liquidity risk. These risks arise from open positions in interest rate,

currency and equity products, all of which are exposed to general and specific market

movements. The risks that the Group primarily faces due to the nature of its assets and

liabilities are interest rate risk and equity price risk.

The Group has developed its Asset/Liability management framework to further support

the manner in which these risk positions are managed. It actively manages its assets to

achieve a competitive rate of return within risk objectives delineated by asset liquidity

measures, duration targets and credit quality parameters. The respective Investment

Committees review and approve investment strategies on a periodic basis ensuring that

assets are managed efficiently and within approved risk mandates.

(a) Market risk

Market risk comprises interest rate, equity price and foreign currency risks. These risks

arise from variability in fair values of financial instruments or related future cash flows,

as well as from variability of the FCF of insurance contracts due to variability in market

risk variables.

(i) Cash flow and fair value interest rate risk

Other payables are not directly sensitive to the level of market interest rates, as they are

not discounted.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

125

4.Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(i) Cash flow and fair value interest rate risk - continued

Insurance and investment contracts with DPF at Group level have benefit payments that

are fixed and guaranteed at the inception of the contract (for example, sum assured), or

as annual discretionary bonuses are declared. The Group’s primary financial risk on

these contracts is the risk that interest income and capital redemptions from the

financial assets backing the liabilities are insufficient to fund the guaranteed benefits

payable.

The Group does not guarantee a positive fixed rate of return to its long-term contract

policyholders at the inception of a contract. The declaration of discretionary bonuses is

guided by the bonus philosophy of the Board. Once a reversionary bonus is declared, it

is guaranteed to be paid in full at maturity or on the prior death of the life assured. Also

policyholders have the option to withdraw their current year’s bonus without any

charges following the date the bonus is declared.

The bonus philosophy considers historic and current rates of return generated by the

Group’s investment portfolio as well as the Group’s expectations for future investment

returns. The impact of interest rate risk is mitigated by the presence of the DPF. These

guaranteed benefits increase as discretionary benefits are declared and allocated to

contract holders. The current rates of regular and final bonuses are determined by the

Board in consultation with the Approved Actuary. Different bonus rates are declared

on different generations of contracts depending on the type of product, cost structure,

past investment performance and premium rates. Different bonuses are declared to

maintain equity between different generations of contract holders and products with

different characteristics. Future bonus rates are not guaranteed and the assumptions are

set to allow for a fair and orderly run-off of the fund.

All unit-linked and investment contracts with a DPF feature can be surrendered before

maturity for a cash surrender value that is always less than the actual contract liability.

Cash surrender values are determined at the discretion of the Group, and can be varied

from time to time.

The primary factor affecting the level of cash surrender value is the investment return

earned on the assets of the Group. In addition, the cash surrender value is affected by

the expenses, tax and the cost of risk benefits (such as life cover) borne by the Group,

deductions to provide a return to shareholders, as well as profits and losses arising on

other contracts. The expenses include payment of commission, medical report expenses,

office administration costs and other expenses incurred in the setting up and

maintenance of the contract. At most, the cash surrender value will be the amount of the

actual liability reduced by the surrender charge (where applicable).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

126

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(i) Cash flow and fair value interest rate risk - continued

Furthermore, in respect of all with-profits (with the exception of some contracts that

have been in force more than a certain number of years), the Group reserves the right to

increase the level of the surrender charge and, if necessary, to apply a Market Value

Reduction (‘MVR’). A MVR is a deduction which the Group may make on surrender of

a contract with DPF. For example, if the underlying investment return, after allowing

for expenses, tax, risk benefits, shareholder returns and adjustment for profits or losses

on other contracts is less than the return already provided for in the form of

reversionary bonuses, the Group may decide to apply a MVR.

The MVR serves to protect the interests of remaining investors and the Group, who

would otherwise have to subsidise the amount paid on surrendering contracts. The

Group does not apply a standard percentage deduction on all contracts but determines

the deduction to apply to each individual surrender at the time the surrender is made.

The amount depends on a number of factors including the length of time the contract

has been in force and the underlying investment return over the same time period. There

will be no MVR at maturity or on death. This means that at maturity or on death the

payment of the actual contract liability is guaranteed.

The cash surrender value may also be less than the total amount of premiums paid up to

the date of surrender. The Group is not required to, and does not, measure the effect of

the above embedded derivative at fair value.

The Group matches its insurance contract liabilities with a diversified portfolio of assets

which includes equity, debt securities and property. The return from debt and cash-

based securities is subject to interest rate risk.

In general, the Group is exposed to risk associated with the effects of fluctuations in the

prevailing levels of market interest rates. Assets/liabilities issued at variable rates

generally expose the Group to cash flow interest risk. Assets/liabilities issued at fixed

rates generally expose the Group to fair value interest rate risk. Group investment

parameters exist to limit exposure to any one particular issuer and any one particular

security. Periodic reports are prepared at portfolio, legal entity and asset class level that

are circulated to the Group’s key management personnel. Note 22 incorporates maturity

information with respect to the Group's investments.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

127

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(i) Cash flow and fair value interest rate risk - continued

The total assets and liabilities exposed to interest rate risk are the following:


	Group		Company
	2023	2022	2023	2022
		Restated
	€’000	€’000	€’000	€’000

Assets at floating interest rates	70,570	68,536	—	—
Assets at fixed interest rates	1,306,182	1,079,838	15,804	10,341


	1,376,752	1,148,374	15,804	10,341

Reconciled to the notes to the financial statements as follows:


	Group		Company
	2023	2022	2023	2022
		Restated
	€’000	€’000	€'000	€'000

Loans and receivables (Note 22)	—	116,728	—	—
Debt securities (Note 22)	937,669	787,592	13,804	10,341
Deposits with banks and credit institutions (Note 22)	75,977	—	—	—
A component of equity securities and units in unit trusts	360,935	243,126	—	—
Interest bearing cash and cash equivalents	2,171	928	2,000	—


	1,376,752	1,148,374	15,804	10,341


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€'000	€'000
Insurance and reinsurance contracts
Liabilities	(1,969,216)	(1,959,723)	(40,446)	(52,773)
Assets	22,024	32,343	10,734	22,340
	(1,947,192)	(1,927,380)	(29,712)	(30,433)

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

128

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(i) Cash flow and fair value interest rate risk - continued

Interest rate risk in relation to hybrid contracts, amounting to €30.6 million (2022

restated: €26.60 million) has been excluded as the directors consider the exposure to be

insignificant.

In managing its portfolio, the Group entered into fixed income security futures

contracts. Accordingly, it is exposed to movements in interest rates in the respective

markets of the underlying, which comprise short, medium and long-term sovereign

debt. The notional amount of futures contracts outstanding at 31 December is shown

below:


	Group
	2023	2022
	€’000	€’000

Long positions
- Federal Republic of Germany	23,146	69,704
- United States Government	25,155	—


	48,301	69,704



Short positions
- Federal Republic of Germany	90,016	76,362
- United States Government	18,352	2,730


	108,368	79,092

Up to the reporting date, the Group did not have any hedging policy with respect to

interest rate risk other than as described in note 2.9.

Managing interest rate benchmark reform

A fundamental reform of major interest rate benchmarks is being undertaken globally,

including the replacement of some interbank offered rates (IBORs) with alternative

nearly risk-free rates (referred to as ‘IBOR reform’). Currently, the Group has no

exposures to IBORs on its financial instruments.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

129

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(i) Cash flow and fair value interest rate risk - continued

Sensitivity analysis – interest rate risk

An analysis of the Group’s sensitivity to a 1% increase or decrease in market interest rates

at the reporting date, assuming that all other variables remain constant, is presented below.

An explanation of the method used in preparing such sensitivity analysis and the main

parameters and assumptions underlying the information provided is found in Note 4.1.

Group


	CSM		Profit or loss before tax		Equity
	Increase	Decrease	Increase	Decrease	Increase	Decrease
	€’000	€’000	€’000	€’000	€’000	€’000
31 December2023
Insurance and reinsurance contracts (net)	370	(408)	(40)	(104)	(26)	(68)
Investment contracts with DPF	11,131	(27,317)	952	(2,363)	618	(1,536)
Other investments	—	—	—	—	(289)	268


	11,501	(27,725)	912	(2,467)	303	(1,336)


31 December 2022 (restated)
Insurance and reinsurance contracts (net)	370	(406)	(1,760)	2,071	(1,143)	1,346
Investment contracts with DPF	12,238	(25,601)	1,845	(3,318)	1,199	(2,156)
Other investments	—	—	(37)	40	(354)	341


	12,608	(26,007)	48	(1,207)	(298)	(469)

Company


	Profit or loss before tax		Equity
	Increase	Decrease	Increase	Decrease
	€’000	€’000	€’000	€’000
31 December 2023
Insurance and reinsurance contracts (net)	362	(372)	235	(242)
Other investments	—	—	(289)	268


	362	(372)	(54)	26


31 December 2022 (restated)
Insurance and reinsurance contracts (net)	464	(360)	302	(234)
Other investments	(37)	40	(354)	341


	427	(320)	(52)	107

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

130

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(ii) Equity price risks

The Group’s financial assets are susceptible to the risk of decreases in value due to

changes in the prices of equities. The directors manage this risk of price volatility by

entering into a diverse range of investments including equities and collective

investment schemes. In addition, the Group’s investments are spread geographically in

a diverse number of different countries. The Group has active Investment Committees

that have established a set of investment guidelines that are also approved by the Board

of Directors. Investments over prescribed limits are directly approved by the respective

Boards. These guidelines provide parameters for investment management, including

contracts with external portfolio managers. They include, inter alia, reference to an

optimal spread of the investment portfolio, assessment of equity issuers and maximum

exposures by the Group to any one issuer and its connected parties (with the exception

of investments in Government paper). These parameters also consider solvency

restrictions imposed by the Regulator.

Management structures are in place to monitor all the Group’s overall market positions

on a frequent basis. Reports are prepared at portfolio, legal entity and asset and liability

class level that are circulated to the Group’s relevant key management personnel. These

are also reviewed by the respective Investment Committees and Boards.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

131

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(ii) Equity price risks - continued

The total assets subject to equity price risk are the following:


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Assets subject to equity price risk	622,434	753,882	2,486	1,756


The above includes:

Component of investments in associated undertakings (Note 21)*	23,212	22,512	—	—
A component of equity securities and units in unit trusts	599,222	731,370	2,486	1,756


	622,434	753,882	2,486	1,756

*Investments in associates (Note 21) amounting to €0.40 million (2022:€0.39 million)

for the Group and €0.40 million (2022: €0.39 million) for the Company have been

excluded from equity price risk since they are accounted for under the equity method.

In the case of assets held to cover unit-linked liabilities the exposure is carried by the

contract holder. In the case of capital guaranteed products any shortfalls guaranteed

upon maturity are mitigated by a back-to-back guarantee with international financial

service providers as further referred in 4.2 (a) (i).

The sensitivity for equity price risk illustrates how changes in the fair value of equity

securities (excluding investments in associated undertakings) will fluctuate because of

changes in market prices, whether those changes are caused by factors specific to the

individual equity issuer, or factors affecting all similar equity traded in the market.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

132

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(ii) Equity price risks - continued

An analysis of the Group’s sensitivity to a 10% decrease in equity prices at the reporting

date, assuming that all other variables remain constant, is presented below. An explanation

of the method used in preparing such a sensitivity analysis and the main parameters and

assumptions underlying the information provided is found in Note 4.1.

Group


	CSM	Profit or loss before tax	Equity
	€’000	€’000	€’000

31 December 2023
Investment contracts with DPF	(3,869)	(353)	(229)
Other investments	—	(249)	(211)


	(3,869)	(602)	(440)


31 December 2022 (restated)
Investment contracts with DPF	(7,692)	(543)	(353)
Other investments	—	(119)	(143)


	(7,692)	(662)	(496)

Company


	Profit or loss before tax	Equity
	€’000	€’000

31 December 2023
Other investments	(249)	(211)

31 December 2022
Other investments	(119)	(143)

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

133

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(iii) Currency risk

The Group’s and Company’s liabilities are substantially denominated in euro. The

Group’s foreign currency risk arises primarily from equity securities denominated in

major foreign currencies. The Group hedges its foreign currency denominated debt

securities using foreign exchange forward contracts in order to mitigate the risk that

principal cash flows for these investments fluctuate as a result of changes in foreign

exchange rates. At 31 December 2023 foreign currency exposure amounted to €223.98

million (2022: €263.00 million).

The table below summarises the Group’s exposure to foreign currencies other than

euro.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

134

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(iii) Currency risk - continued

Group


31 December 2023	Net exposure before hedging	Notional amount of currency derivatives	Net exposure after hedging
	€’000	€’000	€’000

Currency of exposure:
USD	255,326	101,730	153,596
CHF	18,203	—	18,203
GBP	10,236	805	9,431
SEK	37,777	24,421	13,356
DKK	13,166	30	13,136
HKD	3,456	—	3,456
Others	12,786	(15)	12,801


	350,950	126,971	223,979

Group


31 December 2022	Net exposure before hedging	Notional amount of currency derivatives	Net exposure after hedging
	€’000	€’000	€’000

Currency of exposure:
USD	194,131	2,325	191,806
CHF	19,762	—	19,762
GBP	6,679	901	5,778
SEK	11,932	—	11,932
DKK	13,378	—	13,378
HKD	7,454	—	7,454
Others	19,687	6,801	12,886


	273,023	10,027	262,996

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

135

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(iii) Currency risk - continued

Within the table above, €190.90 million of the unhedged exposure relates to equity

investments (2022: €238.20 million). Due to an increasingly globalised economy, the

Group’s equity investments are diversified across various currencies. The directors

consider that the exposure to currency risk is appropriately captured in the equity price

risk sensitivity (Note 4.2(a)(ii)). Any residual currency exposure relating to non-equity

investments is not considered to be significant.

The table below summarises the Company’s exposure to foreign currencies other than

euro.

Company


31 December 2023	Net exposure before hedging	Notional amount of currency derivates	Net exposure after hedging
	€’000	€’000	€’000

Currency of exposure:
USD	(155)	—	(155)
GBP	(33)	—	(33)
Other	2	—	2


	(186)	—	(186)

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

136

4. Management of risk - continued

4.2 Financial risk - continued

(a) Market risk - continued

(iii) Currency risk - continued

Company


31 December 2022	Net exposure before hedging	Notional amount of currency derivates	Net exposure after hedging
	€’000	€’000	€’000

Currency of exposure:
USD	(155)	—	(155)
GBP	(33)	—	(33)
Others	2	—	2


	(186)	—	(186)

The Company’s foreign exposure relates to foreign operations now in run-off.

(b) Credit risk

Credit risk is the risk of decreases in value when counterparties are not capable of

fulfilling their obligations or when a change in their credit status takes place. The Group

has exposure to credit risk, which is the risk that a counterparty will be unable to pay

amounts in full when due. Key areas where the Group is exposed to credit risk are:

• Investments and cash and cash equivalents

• Reinsurance contract assets

• Amounts due from insurance intermediaries

• Counterparty risk with respect to forward foreign exchange contracts

The Group places limits on the level of credit risk undertaken from the main categories

of financial instruments. These limits also take due consideration of the solvency

restrictions imposed by the relevant Insurance Regulations. The investment strategy of

the Group considers the credit standing of the counterparty and control structures are in

place to assess and monitor these risk thresholds.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

137

4. Management of risk - continued

4.2 Financial risk - continued

(b) Credit risk - continued

The Group structures the levels of credit risk it accepts by limiting as far as possible its

exposure to a single counterparty or groups of counterparties. The Group has in place

internal control structures to assess and monitor credit exposures and risk thresholds.

The Group’s cash is placed with a number of core domestic credit institutions and

investment grade international banks, thereby reducing the concentration of

counterparty credit risk to an acceptable level.

Reinsurance is used to manage insurance risk. This does not, however, discharge the

Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason,

the Group remains liable for the payment to the policyholder. The creditworthiness of

reinsurers is monitored on a quarterly basis by reviewing credit grades provided by

rating agencies and other publicly available financial information, thereby ensuring the

continuous financial strength of the reinsurer. At the same time as the Board approves

the overall reinsurance protection of the Group, it ensures that the reinsurers’ credit

rating (either Standard & Poor’s or equivalent) is within the parameters set by it.

The Group is exposed to contract holders and intermediaries for insurance revenue.

Credit agreements are in place in all cases where credit is granted, and in the case of

certain larger risks, premium payment warranties are in place. This limits the liability

of the Group towards the insured or any third party if the premium remains unsettled

after the credit period granted and allows the Group to cancel the policy ab initio, if

considered necessary. Records are kept of the payment history for significant contract

holders and intermediaries with whom regular business is conducted. Credit is not

granted to contract holders whose payment history is not satisfactory. Credit risk with

respect to debtors is further limited due to the large number of customers comprising

the Group’s debtor base.

The exposure to individual counterparties is also managed by other mechanisms, such

as the right to offset where counterparties are both debtors and creditors of the Group.

Management information reported to the Group includes details of provisions for

impairment on receivables and subsequent write-offs. The Company performs risk-

based reviews to assess the degree of compliance with the Group’s procedures on credit

and take action accordingly. In the case of MMSV, it is not normal for credit to be

extended to insurance policyholders due to the nature of their business, unless

automatic policy loans are advanced up to the surrender value of the contract.

The Group does not trade in derivative contracts, with the exception of forward

contracts and exchange traded futures. All derivative contracts are placed with quality

financial institutions within the parameters of a hedging policy approved by the Board.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

138

4. Management of risk - continued

4.2 Financial risk - continued

(b) Credit risk - continued

The total assets bearing credit risk are the following:


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€'000	€'000	€'000	€'000

Debt securities	937,669	787,592	13,804	10,341
Deposits with banks and credit institutions	75,977	116,728	—	—
Forward foreign exchange contracts and swaps	1,970	2,698	—	—
A component of reinsurance contract assets	9,701	19,511	9,701	19,511
Trade and other receivables (excluding prepayments)	22,362	25,882	19,645	17,254
Cash and cash equivalents	47,975	137,286	10,780	11,130


Total	1,095,654	1,089,697	53,930	58,236

The carrying amounts disclosed above represent the maximum exposure to credit risk.

The component of reinsurance contract assets exposed to credit risk is analysed in the

table below using Standard & Poor’s rating (or equivalent).


	Group and Company
	2023	2022
		Restated
	€’000	€’000

AA	385	1,820
A	9,293	17,640
Below BBB or not rated	23	51


	9,701	19,511

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

139

4. Management of risk - continued

4.2 Financial risk - continued

(b) Credit risk - continued

These assets other than the reinsurance contract assets are analysed in the table below

using Standard & Poor’s rating (or equivalent).


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€'000	€'000	€'000	€'000

AAA	109,154	115,968	1,383	1,976
AA	188,328	177,241	2,824	766
A	412,833	253,553	7,764	3,991
BBB	248,171	386,998	8,790	9,542
Below BBB or not rated	127,467	136,426	23,467	22,450


	1,085,953	1,070,186	44,228	38,725

Debt securities, receivables and cash and cash equivalents that are not rated are

primarily held with highly reputable financial institutions.

The Group does not hold any collateral as security to its credit risk.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

140

4. Management of risk - continued

4.2 Financial risk - continued

(b) Credit risk - continued

Financial assets that are past due but not impaired

The following other assets are classified as past due but not impaired:


	Group and Company
	2023	2022
		Restated
	€’000	€’000

Within credit terms	10,501	9,779
Not more than three months	4,100	2,952
Within three to twelve months	2,442	2,130
Over twelve months	762	224


	17,805	15,085

IFRS 7 defines a financial asset as being past due when the counterparty has failed to

make a payment when contractually due. It goes further to stipulate that full disclosure

must be made of all balances due from this particular counterparty, including those,

which are still within credit terms and therefore not contractually due.

The overall exposure of the Group and Company in terms of IFRS 7 is €17.81 million

(2022: €15.09 million), of which €10.50 million (2022: €9.78 million) is not

contractually due. It is the view of the directors that no impairment charge is necessary,

due to the following reasons:

1. Settlements after year-end.

2. In cases where the amount has not been settled, agreement for settlement has been

reached or is being negotiated.

Trade receivables at 31 December 2023 did not comprise any amounts (2022: nil)

whose terms had been renegotiated from the original terms and which were classified as

fully performing.

Financial assets that are impaired

Within trade receivables are the following receivables that are classified as impaired

against which a provision for impairment has been provided as per Note 26:


	Group and Company
	2023	2022
	€’000	€’000

Over twelve months (Note 26)	535	440

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

141

4. Management of risk - continued

4.2 Financial risk - continued

(b) Credit risk - continued

A decision to impair an asset is based on the following information that comes to the

attention of the Group:

• Significant financial difficulty of the debtor.

• It becoming probable that the debtor will enter bankruptcy or other financial

reorganisation.

• A breach of contract, such as protracted default in payments

• The debtor has been referred to the in-house legal office.

The Group is exposed to daily calls on its available cash resources mainly from claims

and benefits arising from insurance contracts. Liquidity risk is the risk that cash may

not be available to pay obligations when due at a reasonable cost. The Group manages

its funds in such a manner as to ensure an adequate portion of available funds to meet

such calls. With respect to life insurance contracts this is principally managed through

limits set by the Board of MMSV on the minimum proportion of maturing funds

available to meet such calls. Furthermore, the Group invests a majority of its assets in

listed investments that can be readily disposed of.

The following table indicates the expected timing of cash flows arising from the

maturity or settlement of Group’s liabilities. The expected cash flows do not consider

the impact of early surrenders on life insurance contracts.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

142

4. Management of risk - continued

4.2 Financial risk - continued


	Group expected cash flows (€ millions) 2023
	Payable on demand	0-1 yr	1-2 yrs	2-3 yrs	3-4 yrs	4-5 yrs	>5 yrs	Total
	Undiscounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted

Insurance contract assets - Life insurance contracts	2.0	(8.0)	(7.0)	(6.0)	(6.0)	(5.0)	(26.0)	(56.0)
Insurance contract liabilities - Life insurance contracts	50.0	199.0	169.0	156.0	124.0	145.0	1,039.0	1,882.0
Reinsurance contract liabilities	5.0	2.0	2.0	2.0	2.0	2.0	19.0	34.0
Insurance contract liabilities – liabilities for incurred claims short- term contracts under PAA	—	27.8	5.3	1.2	3.1	0.6	1.4	39.4
Lease liabilities	—	0.4	0.4	0.3	0.3	0.2	0.4	2.0
Other payables	18.0	—	—	—	—	—	—	18.0


	Group expected cash flows (€ millions) 2022
	Payable on demand	0-1 yr	1-2 yrs	2-3 yrs	3-4 yrs	4-5 yrs	>5 yrs	Total
	Undiscounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted

Insurance contract assets - Life insurance contracts	2.0	(8.0)	(7.0)	(6.0)	(5.0)	(4.0)	(18.0)	(46.0)
Insurance contract liabilities - Life insurance contracts	48.0	211.0	183.0	155.0	143.0	113.0	1,027.0	1,880.0
Reinsurance contract liabilities	2.0	2.0	2.0	1.0	2.0	1.0	15.0	25.0
Insurance contract liabilities – liabilities for incurred claims short-term contracts under PAA	—	33.9	8.0	1.3	4.3	1.3	2.6	51.4
Lease liabilities	—	0.4	0.4	0.3	0.2	0.2	0.2	1.7
Other payables	17.7	—	—	—	—	—	—	17.7

Expected cash flows on unit linked liabilities, presented under investment contract

liabilities amounting €123.3m (2022: €69.1m) and as part of insurance contract

liabilities €34.8m (2022: €31.2m), have not been included as the directors consider that

there is limited exposure to liquidity risk given that these are principally backed by unit

linked assets.

The amounts which are undiscounted and payable on demand mainly consist of long-

term contracts claims outstanding.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

143

4. Management of risk - continued

4.2 Financial risk - continued


	Company expected cash flows (€ millions) 2023
	Payable on demand	0-1 yr	1-2 yrs	2-3 yrs	3-4 yrs	4-5 yrs	>5 yrs	Total
	Undiscounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted

Insurance contract liabilities – liabilities for incurred claims short-term contracts under PAA	—	27.8	5.3	1.2	3.1	0.6	1.4	39.4
Lease liabilities	—	0.4	0.4	0.3	0.3	0.2	0.4	2.0
Other payables	9.3	—	—	—	—	—	—	9.3


	Company expected cash flows (€ millions) 2022
	Payable on demand	0-1 yr	1-2 yrs	2-3 yrs	3-4 yrs	4-5 yrs	>5 yrs	Total
	Undiscounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted	Discounted

Insurance contract liabilities – liabilities for incurred claims short-term contracts under PAA	—	33.9	8.0	1.3	4.3	1.3	2.6	51.4
Lease liabilities	—	0.4	0.3	0.3	0.2	0.2	0.2	1.6
Other payables	7.3	—	—	—	—	—	—	7.3

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

144

4. Management of risk - continued

4.2 Financial risk - continued

The table below analyses the Group’s derivative financial instruments that will be

settled on a gross basis. The amounts disclosed in the table are the contractual

undiscounted cash flows. Balances due within 12 months equal their carrying balances,

as the impact of discounting is not significant.


	Group
	2023	2022
	€’000	€’000
At 31 December
Foreign exchange contracts
- outflow	(140,177)	(97,745)
- inflow	142,147	100,443

At 31 December 2023 and 2022, the above derivatives were due to be settled within

three months after year end.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

145

4.Management of risk - continued

4.3Fair values

The following table presents the assets measured in the statement of financial position

at fair value by level of the following fair value measurement hierarchy at 31 December

2023:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities

(Level 1);

• Inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly (that is, as prices) or indirectly (that is,

derived from prices) (Level 2); and

• Inputs for the asset or liability that are not based on observable market data

(that is, unobservable inputs) (Level 3).

The Group recognises transfers between levels of the fair value hierarchy at the end of

the reporting period during which the change has occurred.

The following tables present the assets and liabilities measured at fair value at 31

December 2023.


Group
	Level 1	Level 2	Level 3	Total
	€'000	€'000	€'000	€'000

Assets
Financial assets at fair value through profit or loss
- Equity Securities, units in unit trusts and collective investment schemes	934,308	91,550	94,839	1,120,697
- Debt Securities	532,525	316,536	—	849,061
Debt securities at FVOCI	7,204	6,600	—	13,804
Forward foreign exchange contracts and swaps	—	1,970	—	1,970
Investment in associated undertakings	—	23,346	—	23,346


Total assets	1,474,037	440,002	94,839	2,008,878


Liabilities
Investment Contract Liabilities	—	123,253	—	123,253


Total liabilities	—	123,253	—	123,253

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

146

4.Management of risk - continued

4.3Fair values - continued


Company
	Level 1	Level 2	Total
	€'000	€'000	€'000

Assets
Financial assets at fair value through profit or loss
- Equity securities, units in unit trusts and collective investment schemes	667	1,819	2,486
Debt securities at FVOCI	7,204	6,600	13,804


Total assets	7,871	8,419	16,290

The following tables present the assets measured at fair value at 31 December 2022.


Group
	Level 1	Level 2	Level 3	Total
	€'000	€'000	€'000	€'000

Assets
Financial assets at fair value through profit or loss
- Equity securities, units in unit trusts and collective investment schemes	973,661	40,912	61,609	1,076,182
- Debt securities	529,741	248,113	—	777,854
Other available-for-sale investments	5,605	4,703	—	10,308
Forward foreign exchange contracts and swaps	—	2,698	—	2,698
Investment in associated undertakings	—	22,647	—	22,647


Total assets	1,509,007	319,073	61,609	1,889,689


Liabilities
Investment contract liabilities (restated)	—	69,054	—	69,054


Total liabilities	—	69,054	—	69,054

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

147

4.Management of risk - continued

4.3Fair values - continued


Company	Level 1	Level 2	Total
	€'000	€'000	€'000

Assets
Financial assets at fair value through profit or loss
- Equity securities, units in unit trusts and collective investment schemes	—	1,186	1,186
- Debt securities	603	—	603
Other available-for-sale investments	5,605	4,703	10,308


Total assets	6,208	5,889	12,097

Fair value measurements classified as Level 1 include government debt securities, units

in unit trusts and collective investments schemes and foreign listed equities.

Corporate debt securities are classified as Level 2 in view of their trading

characteristics. The financial liabilities for unit-linked contracts were classified as

Level 2. The fair value of these contracts is determined using the current unit values

that reflect the fair values of the financial assets (classified as Level 1) linked to the

financial liability. Derivative foreign exchange forward contracts have been classified

as Level 2. The fair value of these instruments is determined by reference to market

observable forward currency rates and interest rates. Domestic equities are classified as

Level 2 in view of their trading characteristics.

At 31 December 2023, 4.7% (2022:3.3%) of the financial assets measured at fair value

on a recurring basis were classified as Level 3. They constitute investment in unlisted

equities. The Group has €94.80m (2022:€61.60m) assets classified as Level 3, the

valuation of which has been determined by reference to the latest available net asset

values of the underlying investment or the latest transaction price.

The analysis of investment property is included within Note 19.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

148

4.Management of risk - continued

4.3Fair values - continued

The following table presents the changes in Level 3 instruments for the year ended 31

December:


	Group

		2022
		Equity securities
		€'000

	Opening balance	18,756
	Additions	38,363
	Total gains recognised in profit or loss	4,490


	Closing balance	61,609



		2023
		Equity securities
		€'000
	Opening balance	61,609
	Additions	30,252
	Total gains recognised in profit or loss	2,978


	Closing balance	94,839

At 31 December 2023 and 2022, the carrying amount of the Group’s and Company’s

other financial assets and liabilities approximated their fair values.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

149

5.Capital management

The Group’s policy is to maintain a strong capital base to support its business growth

plans and comply with all regulatory requirements on an ongoing basis whilst assessing

the impact of shareholder returns on its capital employed. The Group defines capital as

shareholders’ equity.

The Group’s objectives when managing capital are to:

• comply with the obligations to hold Eligible Own Funds to cover the Solvency

Capital Requirement and Minimum Capital Requirement in terms of the Insurance

Business Act, 1998, (Chapter 403, Laws of Malta) and the applicable Insurance

Rules issued under the Insurance Business Act (‘Insurance Rules’) by the Malta

Financial Services Authority (‘MFSA’);

• provide for the capital requirements of the companies within the Group;

• safeguard the Group’s and individual component companies’ ability to continue as a

going concern and provide returns for shareholders and benefits for other

stakeholders; and

• to provide an adequate return to shareholders by pricing insurance contracts

commensurate with the level of risk.

The individual insurance Group companies are required to hold regulatory capital for

their non-life and life assurance business in compliance with the Insurance Rules issued

by the MFSA. The minimum capital requirements must be maintained at all times

throughout the period. The individual Group companies monitor the level of their own

funds on a regular basis. Any transactions that may potentially affect the individual

company’s own funds and solvency position are immediately reported to their

respective directors and shareholders for resolution.

The Company’s Minimum Capital Requirement Absolute Floor stands at €8,000,000 as

per paragraph 5.6.4 of Chapter 5 (‘Valuation of assets and liabilities, technical

provisions, own funds, Solvency Capital Requirement, Minimum Capital Requirement

and investment rules’) of Part B of the Insurance Rules.

Based on management calculations to date, the Company is sufficiently capitalised and

was compliant at all times with the regulatory capital requirements as stipulated by the

MFSA which are in line with the Solvency II requirements. All other companies within

the Group were also compliant with the respective minimum regulatory requirements

throughout the financial period as per management calculations to date.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

150

6. Amounts determined on transition to IFRS 17

For insurance contracts issued by the Group and reinsurance contracts held, an analysis

of insurance revenue for insurance contracts issued and the CSM by transition method

is included in the following tables.


31 December 2023	Life Risk	Investment contracts with DPF	Total

	€’000	€’000	€’000

Insurance contracts issued
Insurance revenue
New contracts and contracts measured under the full retrospective approach at transition	(12,905)	(3,241)	(16,146)
Contracts measured under the fair value approach at transition	(138)	(31,427)	(31,565)


	(13,043)	(34,668)	(47,711)


CSM
New contracts and contracts measured under the full retrospective approach at transition	24,909	8,770	33,679
Contracts measured under the fair value approach at transition	7,285	62,957	70,242


	32,194	71,727	103,921


	31 December 2023		Life Risk

			€’000

	Reinsurance contracts held
	CSM
	New contracts and contracts measured under the full retrospective approach at transition		(8,806)
	Contracts measured under the fair value approach at transition		(4,157)


			(12,963)

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

151

6. Amounts determined on transition to IFRS 17 - continued


31 December 2022	Life Risk	Investment contracts with DPF	Total

	€’000	€’000	€’000

Insurance contracts issued
Insurance revenue
New contracts and contracts measured under the full retrospective approach at transition	(11,714)	—	(11,714)
Contracts measured under the fair value approach at transition	(157)	(35,187)	(35,344)


	(11,871)	(35,187)	(47,058)


CSM
New contracts and contracts measured under the full retrospective approach at transition	19,868	—	19,868
Contracts measured under the fair value approach at transition	4,607	54,709	59,316


	24,475	54,709	79,184


	31 December 2022	Life Risk
		€’000

	Reinsurance contracts held
	CSM
	New contracts and contracts measured under the full retrospective approach at transition	(6,441)
	Contracts measured under the fair value approach at transition	(3,413)


		(9,854)

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

152

6. Amounts determined on transition to IFRS 17 - continued

Expected recognition of the contractual service margin

An analysis of the expected recognition of the CSM remaining at the end of the

reporting period in profit or loss is provided in the following table:


As at 31 December 2023	Insurance contracts issued		Reinsurance contracts held
	Life Risk	Investment contracts with DPF	Total CSM for insurance contracts issued	Life Risk	Total CSM for reinsurance contracts held
	€’000	€’000	€’000	€’000	€’000

1	(3,418)	(6,027)	(9,445)	1,421	1,421
2	(3,144)	(5,560)	(8,704)	1,302	1,302
3	(2,888)	(5,120)	(8,008)	1,193	1,193
4	(2,645)	(4,704)	(7,349)	1,089	1,089
5	(2,424)	(4,374)	(6,798)	994	994
6 – 10	(9,400)	(15,485)	(24,885)	3,823	3,823
> 10	(13,994)	(30,457)	(44,451)	5,394	5,394


Total	(37,913)	(71,727)	(109,640)	15,216	15,216


As at 31 December 2022	Insurance contracts issued		Reinsurance contracts held
	Life Risk	Investment contracts with DPF	Total CSM for insurance contracts issued	Life Risk	Total CSM for reinsurance contracts held
	€’000	€’000	€’000	€’000	€’000

1	(2,526)	(6,606)	(9,132)	1,055	1,055
2	(2,325)	(5,817)	(8,142)	967	967
3	(2,134)	(5,150)	(7,284)	883	883
4	(1,957)	(4,587)	(6,544)	809	809
5	(1,791)	(4,069)	(5,860)	739	739
6 – 10	(6,967)	(13,659)	(20,626)	2,850	2,850
> 10	(11,031)	(14,821)	(25,852)	4,244	4,244


Total	(28,731)	(54,709)	(83,440)	11,547	11,547

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

153

7.Segment information

Management has determined the operating segments based on the reports reviewed by

the Executive Management team that are used to make strategic decisions.

The segment results for the years ended 31 December 2023 and 2022 are indicated

below.

(i) Insurance revenue and insurance service result

Short-term insurance contracts under PAA

Group and Company


At 31 December 2023	Motor	Fire and other property damages	Health	Other classes	Group Life	Total
	€’000	€’000	€’000	€’000	€’000	€’000

Insurance revenue	42,997	16,830	15,808	14,522	2,712	92,869
Insurance service expenses	(35,577)	(10,255)	(14,012)	(6,578)	(2,033)	(68,455)
Net expenses from reinsurance contracts held	(2,742)	(5,721)	143	(3,913)	(14)	(12,247)


Insurance service result	4,678	854	1,939	4,031	665	12,167



At 31 December 2022	Motor	Fire and other property damages	Health	Other classes	Life	Total
	Restated	Restated	Restated	Restated	Restated	Restated
	€’000	€’000	€’000	€’000	€’000	€’000

Insurance revenue	39,180	15,333	13,960	13,208	2,669	84,350
Insurance service expenses	(40,861)	(10,937)	(10,803)	(8,814)	(1,268)	(72,683)
Net expenses from reinsurance contracts held	778	(4,085)	(79)	(2,117)	(224)	(5,727)


Insurance service result	(903)	311	3,078	2,277	1,177	5,940

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

154

7.Segment information - continued

(i) Insurance revenue and insurance service result - continued

Long-term and linked long-term business

In the opinion of the directors, the subsidiary MAPFRE MSV Life p.l.c. primarily

operates in a single business segment being that of long-term and linked long-term

insurance business.

An analysis of insurance revenue, insurance service expenses and net expenses from

reinsurance contracts held by contract type for 2023 and 2022 is included in the

following tables.


2023	Life Risk	Investment contracts with DPF	Total
	€’000	€’000	€’000

Insurance revenue
Amounts relating to change in the LRC
- Expected incurred claims and other directly attributable expenses	7,945	24,576	32,521
- Changes in risk adjustment for non-financial risk for the risk expired	1,397	140	1,537
- CSM recognised for the services provided	3,589	6,178	9,767
- Experience adjustments – arising from premiums received in the period other than those that relate to future service	61	18	79
Insurance acquisition cash flows recovery	51	3,756	3,807


	13,043	34,668	47,711


Insurance service expenses
Incurred claims and other directly attributable expenses	(5,471)	(13,711)	(19,182)
Insurance acquisition cash flows amortization	(51)	(3,756)	(3,807)


	(5,522)	(17,467)	(22,989)


Net income (expenses) from reinsurance contracts held
Amounts relating to the changes in the remaining coverage
- Expected incurred claims and other directly attributable expenses recovery	(2,309)	—	(2,309)
- Change in the risk adjustment for non-financial risk for the risk expired	(242)	—	(242)
- CSM recognised for the services provided	(1,516)	—	(1,516)
- Experience adjustments – arising from ceded premiums paid in the period other than those that relate to future service	(122)	—	(122)


Reinsurance expenses	(4,189)	—	(4,189)
Other incurred directly attributable expenses	(382)	—	(382)
Incurred claims recovery	974	—	974


	(3,597)	—	(3,597)


Total insurance service result	3,924	17,201	21,125

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

155

7.Segment information - continued

(i) Insurance revenue and insurance service result - continued

Long-term and linked long-term business - continued


2022	Life Risk	Investment contracts with DPF	Total
	€’000	€’000	€’000

Insurance revenue
Amounts relating to change in the LRC
- Expected incurred claims and other directly attributable expenses	7,393	21,791	29,184
- Changes in risk adjustment for non-financial risk for the risk expired	1,783	259	2,042
- CSM recognised for the services provided	2,624	6,754	9,378
- Experience adjustments – arising from premiums received in the period other than those that relate to future service	4	32	36
Insurance acquisition cash flows recovery	67	6,351	6,418

	11,871	35,187	47,058


Insurance service expenses
Incurred claims and other directly attributable expenses	(4,538)	(14,919)	(19,457)
Changes that relate to past service – changes in the FCF relating to the LIC	2	—	2
Insurance acquisition cash flows amortization	(67)	(6,351)	(6,418)


	(4,603)	(21,270)	(25,873)


Net expenses from reinsurance contracts held

Amounts relating to the changes in the remaining coverage
- Expected incurred claims and other directly attributable expenses recovery	(2,177)	—	(2,177)
- Change in the risk adjustment for non-financial risk for the risk expired	(355)	—	(355)
- CSM recognised for the services provided	(1,141)	—	(1,141)
- Experience adjustments – arising from ceded premiums paid in the period other than those that relate to future service	781	—	781


Reinsurance expenses	(2,892)	—	(2,892)
Other incurred directly attributable expenses	(303)	—	(303)
Effect of changes in the risk of reinsurers’ non-performance	—	—	—
Incurred claims recovery	1,050	—	1,050


	(2,145)	—	(2,145)


Total insurance service result	5,123	13,917	19,040

100% (2022: 100%) of consolidated insurance revenue emanate from contracts

concluded in or from Malta. All premiums emanate from external customers and there

is no business transacted between segments other than as disclosed in Note 35.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

156

8.Investment return

An analysis of net investment return and net financial result by product line is

presented below:


	Group						Company
31 December 2023	Life Risk	Investment contracts with DPF	Investment contracts without DPF	Short- Term contracts measured under the PAA	Other	Total	Short- Term contracts measured under the PAA
	€’000	€’000	€’000	€’000	€’000	€’000	€’000

Net investment income/(expenses)
Share of profit of other associated undertaking, net of tax	—	—	—	—	110	110	—
Dividend income from group companies	—	—	—	—	—	—	147
Interest revenue from financial assets not measured at FVTPL	—	1,257	—	221	3,744	5,222	221
Interest expenses from financial assets not measured at FVTPL	—	—	—	(32)	—	(32)	(32)
Net gains on FVTPL instruments	500	170,178	8,194	812	714	180,398	812
Other investment income	—	425	—	9	—	434	9
Net (losses)/gains from fair value adjustments to investment properties	—	(3,925)	—	61	(409)	(4,273)	61
Investment income from investment properties	—	5,698	—	817	—	6,515	817
Expenses arising from investment properties	—	(368)	—	—	—	(368)	—
Other investment expenses	—	(5,927)	—	(23)	(27)	(5,977)	(23)
Net credit impairment losses	—	(37)	—	—	15	(22)	—
Interest on lease liabilities	—	—	—	(49)	—	(49)	(49)


Net investment income	500	167,301	8,194	1,816	4,147	181,958	1,963


Finance income/(expenses) from insurance contracts issued
Changes in value of underlying assets of contracts measured under VFA	—	(178,200)	—	—	—	(178,200)	—
Interest accreted	1,542	—	—	—	—	1,542	—
Effect of changes in interest rates and other financial assumptions	2,871	—	—	(1,320)	—	1,551	(1,320)
Effect of changes in FCF at current rates when CSM is unlocked at locked-in rates	(1,764)	—	—	—	—	(1,764)	—


Finance expense from insurance contracts issued	2,649	(178,200)	—	(1,320)	—	(176,871)	(1,320)


Finance income/(expenses) from reinsurance contracts held
Interest accreted	(752)	—	—	—	—	(752)	—
Effect of changes in interest rates and other financial assumptions	(2,680)	—	—	486	—	(2,194)	486
Effect of changes in FCF at current rates when CSM is unlocked at locked-in rates	719	—	—	—	—	719	—


Finance (expense)/income from reinsurance contracts held	(2,713)	—	—	486	—	(2,227)	486


Net change in investment contract liabilities	—	—	(8,194)	—	—	(8,194)	—


Net investment return and net financial result	436	(10,899)	—	982	4,147	(5,334)	1,129

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

157

8.Investment return - continued


	Group						Company
31 December 2022	Life Risk	Investment contracts with DPF	Investment contracts without DPF	Short- Term contracts measured under the PAA	Other	Total	Short- Term contracts measured under the PAA
(Restated)	€’000	€’000	€’000	€’000	€’000	€’000	€’000

Net investment income/(expenses)
Share of profit of other associated undertaking, net of tax	—	—	—	—	95	95	—
Dividend income from group companies	—	—	—	—	—	—	1,313
Interest revenue from financial assets not measured at FVTPL	—	1,306	—	74	121	1,501	74
Interest expenses from financial assets not measured at FVTPL	—	—	—	(53)	—	(53)	(53)
Net gains on FVTPL instruments	(8,931)	(274,027)	(10,353)	(300)	(253)	(293,864)	(300)
Other investment income	—	992	—	7	—	999	7
Net (losses)/gains from fair value adjustments to investment properties	—	(2,461)	—	(642)	56	(3,047)	(642)
Investment income from investment properties	—	5,420	—	776	—	6,196	776
Expenses arising from investment properties	—	(328)	—	(13)	—	(341)	(13)
Other investment expenses	—	(6,621)	—	(18)	(14)	(6,653)	(18)
Net credit impairment losses	—	—	—	—	—	—	—
Interest on lease liabilities	—	—	—	(51)	—	(51)	(51)


Net investment (expense)/income	(8,931)	(275,719)	(10,353)	(220)	(90)	(295,218)	1,093


Finance income/(expenses) from insurance contracts issued
Changes in value of underlying assets of contracts measured under VFA	—	268,747	—	—	—	268,747	—
Interest accreted	(213)	—	—	—	—	(213)	—
Effect of changes in interest rates and other financial assumptions	(6,433)	—	—	2,604	—	(3,829)	2,604
Effect of changes in FCF at current rates when CSM is unlocked at locked-in rates	(10)	—	—	—	—	(10)	—


Finance (expense)/income from insurance contracts issued	(6,656)	268,747	—	2,604	—	264,695	2,604


Finance income/(expenses) from reinsurance contracts held
Interest accreted	124	—	—	—	—	124	—
Effect of changes in interest rates and other financial assumptions	6,881	—	—	(1,059)	—	5,822	(1,059)
Effect of changes in FCF at current rates when CSM is unlocked at locked-in rates	(11)	—	—	—	—	(11)	—


Finance income/(expense) from reinsurance contracts held	6,994	—	—	(1,059)	—	5,935	(1,059)


Net change in investment contract liabilities	—	—	10,353	—	—	10,353	—


Net investment (losses)/return and net financial result	(8,593)	(6,972)	—	1,325	5	(14,235)	2,638

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

158

9. Other income


	Group
	2023	2022
	€'000	€'000

Investment management fees	1,222	203
Management fees	644	603
Other income	37	567


	1,903	1,373

10.Profit before tax

The profit before tax is stated after charging/(crediting):


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Employee compensation (Note 11)	15,218	13,709	8,295	7,553
Depreciation/amortisation:
- intangible assets (Note 16)	4,549	2,575	2,147	1,973
- property, plant and equipment (Note 18)	1,079	1,071	616	579
Release of provision for impairment on receivables (Note 26)	—	(135)	—	(135)
Impairment of receivables	61	29	61	29
Increase in provision for impairment on receivables (Note 26)	41	188	41	188

The financial statements include fees, exclusive of VAT, charged by the Company's

auditors for services rendered during the financial years ended 31 December 2023 and

2022, relating to entities that are included in the consolidation amounting to:

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

159

10.Profit before tax - continued


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Annual statutory audit	741	599	320	271
IFRS 17 Transition Audit	810	—	300	—
Solvency II audit	113	105	49	45
Non-audit services	—	2	—	—

Paid during the year:
for financial year 2022	160	296	—	136
for financial year 2021	410	276	181	127
for financial year 2020	—	—	—	—

11. Employee compensation


	Group		Company
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Salaries	14,332	12,908	7,799	7,098
Social security costs	726	667	420	395
Contributions to Employee Voluntary Occupational Pension Scheme	160	134	76	60


	15,218	13,709	8,295	7,553

The average number of persons employed during the year was:


	Group		Company
	2023	2022	2023	2022
	No.	No.	No.	No.

Key management personnel	27	27	14	14
Managerial	34	41	20	19
Technical	232	213	142	139
Administrative	15	9	9	5


	308	290	185	177

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

160

12. Income tax expense


	Group		Company
		Restated		Restated
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Current tax expense	6,061	44,721	3,588	1,888
Deferred tax expense (Note 23)	2,015	(42,044)	(412)	525


Income tax expense	8,076	2,677	3,176	2,413

The tax on the Group’s and Company’s profit before tax differs from the theoretical

amount that would arise using the basic tax rate as follows:


	Group		Company
		Restated		Restated
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Profit before tax	24,019	8,292	9,864	6,596



Tax at 35%	8,407	2,902	3,452	2,309
Adjusted for tax effect of :
Net exempt income and disallowed expenses	(410)	(17)	(118)	306
Property withholding tax at 8% or10%	321	(97)	20	170
Other	(242)	(111)	(178)	(372)


Income tax expense	8,076	2,677	3,176	2,413

13. Directors’ emoluments


	Group		Company
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Directors' fees	264	307	170	224

Group Directors’ fees include fees payable to the Company’s directors both from the

Company and from other Group Companies where applicable.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

161

14.Earnings per share

Earnings per share are based on the net profit for the year divided by the weighted

average number of ordinary shares in issue during the year.


	Group
		Restated
	2023	2022
	€'000	€'000

Profit attributable to owners of the Company	11,309	4,476



Number of ordinary shares in issue (Note 28)	92,000	92,000

Basic and diluted earnings per share attributable to owners of the Company (€)	0.123	0.049

15.Dividends

A final gross dividend in respect of year ended 31 December 2023 of €0.073057

(2022: €0.054617) per share amounting to a total dividend of €6,721,231 (2022:

€5,024,817) is to be proposed by the directors at the forthcoming annual general

meeting. This is equivalent to a net dividend of €0.048913 (2022: €0.038043) per

share amounting to a total net dividend of €4,500,000 (2022: €3,500,000).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

162

16.Intangible assets



Group
	Computer Software	Deferred Acquisition cost (i)	Total (ii)
	€'000's	€'000's	€'000's

At 1 January 2022
Cost or valuation	43,805	3,719	47,524
Accumulated amortisation and impairment	(21,345)	(3,554)	(24,899)


Net book amount	22,460	165	22,625


Year ended 31 December 2022
Opening net book amount	22,460	165	22,625
Additions	7,946	155	8,101
Disposals	(2)	—	(2)
Amortisation charge	(2,563)	(12)	(2,575)


Closing net book amount	27,841	308	28,149


At 31 December 2022
Cost or valuation	51,749	3,874	55,623
Accumulated amortisation and impairment	(23,908)	(3,566)	(27,474)


Net book amount	27,841	308	28,149


Year ended 31 December 2023
Opening net book amount	27,841	308	28,149
Additions	6,581	551	7,132
Amortisation charge	(4,502)	(47)	(4,549)


Closing net book amount	29,920	812	30,732


At 31 December 2023
Cost or valuation	58,330	4,425	62,755
Accumulated amortisation and impairment	(28,410)	(3,613)	(32,023)


Net book amount	29,920	812	30,732

(i) This intangible asset relates to investment contracts without DPF only.

(ii) The amount presented is after the derecognition of the previously reported balance

of value of in-force business as explained in Note 1.1 (a).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

163

16.Intangible assets - continued


	Company	Computer Software
		€'000

	At 1 January 2022
	Cost	18,238
	Accumulated amortisation	(9,092)


	Net book amount	9,146



	Year ended 31 December 2022
	Opening net book amount	9,146
	Additions	2,794
	Amortisation charge	(1,973)


	Closing net book amount	9,967



	At 31 December 2022
	Cost	21,032
	Accumulated amortisation	(11,065)


	Net book value	9,967



	Year ended 31 December 2023
	Opening net book amount	9,967
	Additions	2,571
	Amortisation charge	(2,147)


	Closing net book amount	10,391



	At 31 December 2023
	Cost	23,603
	Accumulated amortisation	(13,212)


	Net book amount	10,391

No amortisation (2022: nil) is included in acquisition costs and €2.15 million (2022:

€1.97 million) is included in administrative expenses.

Computer software mainly represents amounts capitalised relating to the development

of the Group and Company’s IT system by related companies forming part of the

MAPFRE S.A. Group.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

164

17. Leases

(a)Leases as the lessee

The Group leases property and motor vehicles. Property leases generally run for a

period of five to seven years without the option to renew, whilst motor vehicle leases

typically run for a period of seven years. Lease payments are subsequently renegotiated

to reflect market rates.

i. Right-of-use assets

Right-of-use assets related to leased motor vehicles and properties that do not meet the

definition of investment property are presented as a separate line item on the face of the

Statement of Financial Position.


2022	Group


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Balance on 01 January	1,204	598	1,802
Derecognition of right-of-use assets	—	(46)	(46)
Depreciation charge for the year	(212)	(129)	(341)
Depreciation released on derecognition	—	46	46


Balance on 31 December	992	469	1,461


2023	Group


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Balance on 01 January	992	469	1,461
Additions	437	40	477
Derecognition of right-of-use assets	—	(29)	(29)
Depreciation charge for the year	(219)	(118)	(337)
Depreciation released on derecognition	—	29	29


Balance on 31 December	1,210	391	1,601

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

165

17. Leases - continued

(a)Leases as the lessee - continued

i. Right-of-use assets - continued


2022	Company


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Balance on 1 January	1,204	481	1,685
Depreciation charge for the year	(212)	(95)	(307)


Balance on 31 December	992	386	1,378


2023	Company


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Balance on 1 January	992	386	1,378
Additions	437	—	437
Depreciation charge for the year	(219)	(87)	(306)


Balance on 31 December	1,210	299	1,509

ii.Amounts recognised in profit or loss


2022	Group


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Depreciation of right-of-use assets	212	129	341
Interest expense on lease liabilities	27	28	55

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

166

17. Leases - continued

(a)Leases as the lessee - continued

ii.Amounts recognised in profit or loss - continued


2023	Group


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Depreciation of right-of-use assets	219	118	337
Interest expense on lease liabilities	30	24	54


2022	Company


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Depreciation of right-of-use assets	212	95	307
Interest expense on lease liabilities	27	24	51


2023	Company


	Property	Motor vehicles	Total
	€’000	€’000	€’000

Depreciation of right-of-use assets	219	87	306
Interest expense on lease liabilities	30	19	49

In 2023, the Company recognised €29,431 (2022: €28,119), relating to short-term

leases, as lease expense in the statement of profit or loss and other comprehensive

income.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

167

17. Leases - continued

(b) Leases as the lessor

The Group and the Company lease out certain property. Note 19 sets out information

about investment property. The Group has classified these leases as operating leases

because they do not transfer substantially all the risks and rewards incidental to the

ownership of the assets.

The following table sets out a maturity analysis of lease payments receivable, showing

the undiscounted lease payments to be received after the reporting date.

Operating leases


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Less than one year	5,815	5,530	660	654
One to two years	4,079	4,309	445	510
Two to three years	2,000	3,229	386	314
Three to four years	1,401	1,578	38	274
Four to five years	1,052	1,217	—	38
More than five years	3,113	3,726	—	—


Total	17,460	19,589	1,529	1,790

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

168

18.Property, plant and equipment

Group


	Freehold		Furniture
	land and	Leasehold	fittings and
	buildings	improvements	equipment	Total
	€’000	€’000	€’000	€'000

At 1 January 2022
Cost	14,201	3,643	8,388	26,232
Accumulated depreciation	(171)	(2,152)	(6,252)	(8,575)


Closing net book amount	14,030	1,491	2,136	17,657


Year ended 31 December 2022
Opening net book amount	14,030	1,491	2,136	17,657
Additions	156	580	754	1,490
Amount transferred to investment property (Note 19)	(457)	—	—	(457)
Depreciation charge	(89)	(238)	(744)	(1,071)
Depreciation on amount transferred to investment property (Note 19)	7	—	—	7


Closing net book amount	13,647	1,833	2,146	17,626


At 31 December 2022
Cost	13,900	4,223	9,142	27,265
Accumulated depreciation	(253)	(2,390)	(6,996)	(9,639)


Net book amount	13,647	1,833	2,146	17,626



Year ended 31 December 2023
Opening net book amount	13,647	1,833	2,146	17,626
Additions	170	158	308	636
Depreciation charge	(104)	(230)	(745)	(1,079)


Closing net book amount	13,713	1,761	1,709	17,183


At 31 December 2023
Cost	14,070	4,381	9,450	27,901
Accumulated depreciation	(357)	(2,620)	(7,741)	(10,718)


Net book amount	13,713	1,761	1,709	17,183

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

169

18.Property, plant and equipment - continued

Company


	Freehold		Furniture
	land and	Leasehold	fittings and
	buildings	improvements	equipment	Total
	€'000	€'000	€'000	€'000

At 1 January 2022
Cost	2,191	3,056	3,347	8,594
Accumulated depreciation	(18)	(1,597)	(2,437)	(4,052)


Net book amount	2,173	1,459	910	4,542


Year ended 31 December 2022
Opening net book amount	2,173	1,459	910	4,542
Transfer to investment property (Note 19)	(457)	—	—	(457)
Additions	—	579	388	967
Depreciation Charge	(21)	(212)	(346)	(579)
Depreciation released on transfer to investment property (Note 19)	7	—	—	7


Closing net book amount	1,702	1,826	952	4,480


At 31 December 2022
Cost	1,734	3,635	3,735	9,104
Accumulated depreciation	(32)	(1,809)	(2,783)	(4,624)


Net book amount	1,702	1,826	952	4,480

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

170

18.Property, plant and equipment - continued


Company - continued

	Freehold		Furniture
	land and	Leasehold	fittings and
	buildings	improvements	equipment	Total
	€’000	€’000	€’000	€’000

Year ended 31 December 2023
Opening net book amount	1,702	1,826	952	4,480
Additions	—	158	187	345
Depreciation charge	(17)	(228)	(371)	(616)


Closing net book amount	1,685	1,756	768	4,209


At 31 December 2023
Cost or valuation	1,734	3,793	3,922	9,449
Accumulated depreciation	(49)	(2,037)	(3,154)	(5,240)


Net book amount	1,685	1,756	768	4,209

Freehold land and buildings transferred from investment property are transferred at the

fair value at the point of transfer and are subsequently depreciated. Transfers to

investment property are made at the depreciated value at the point of transfer. If the fair

value of the freehold land and buildings is significantly different as compared to its

carrying amount then a revaluation adjustment is recorded.

Depreciation charge has been included in administrative expenses.

The Group’s and Company’s Land and buildings are shown at fair value (level 3).

A valuation of land and buildings was carried out by external qualified valuers during

2021. The fair value movements were debited to profit or loss. The carrying amount of

land and buildings that would have been included in the financial statements had these

assets been carried at cost less accumulated depreciation for the Group is €13.7 million

(2022: €13.6 million) and for the Company €0.8 million (2022: €0.8 million).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

171

18. Property, plant and equipment - continued

Valuation processes

Periodically, the Group engages qualified valuers to determine the fair value of the

Group’s land and buildings. As at 31 December 2021, the fair value of the land and

buildings of the subsidiary was determined by PwC Malta. No valuation was performed

in 2022 and 2023 on the land and building of the subsidiary. The Company’s land and

buildings were revalued by PwC Malta in 2023 with no significant change to the

carrying amount.

Whenever a valuation is carried out the finance department:

• verifies all major inputs to the valuation report prepared by the qualified valuer;

• assesses property valuation movements when compared to the prior valuation

report; and

• holds discussions with the qualified valuer.

Valuation techniques

The fair value of the Group’s and the Company’s land and buildings, with a total

carrying amount of €13.70 million and €1.70 million respectively (2022: €13.60

million and €1.70 million respectively), was determined by capitalizing future net

income streams based on significant unobservable inputs. These inputs include:


Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Discounted cash flows: The valuation model considers the present value of net cash flows potentially generated from the property, taking into account the expected rental growth rate, void periods and costs not paid for by the tenants. The expected net cash flows are discounted using the risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), lease terms, property risk premium and inflation.	– Risk-adjusted discount rate varying between 6.2% and 7.9% (2022: 6.2% and 6.8%) – The valuation provides for a void factor varying between 2.5% and 4.5% (2022: 2.5% and 4.5%) on rental income. – A benchmark lease market rate was applied once current lease terms expired. – Expected market rental growth rate of 2.0% (2022: 2.0%) in line with the implied inflation rate IRR (Internal Rate of Return).	The estimated fair value would increase/(decrease) if: – The risk-adjusted discount rate were lower/(higher); – Void factor were lower/(higher) – The market rate were higher/(lower); – Expected market rental growth were higher/(lower).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

172

18. Property, plant and equipment - continued

Valuation techniques - continued

Although the properties are currently being used by MMS as its Floriana Regional

Office and MMSV as its head office, for the purpose of the valuation, it was assumed

that the property’s highest and best use would be rental to a third party, assuming same

use. Although the Market Approach was considered, its applicability is limited, due to

the illiquidity of the commercial property market in Malta and therefore, the limited

number of transactions available. Moreover, it is inherently difficult to find

transactions including office blocks that are directly comparable to the property.

19. Investment property


	Group	Company
	€’000	€’000

At 1 January 2022
Cost	65,116	7,022
Accumulated fair value gains	44,900	6,507


Net book amount	110,016	13,529


Year ended 31 December 2022
Opening net book amount	110,016	13,529
Transfer from property, plant & equipment (Note 18)	450	450
Additions	936	76
Disposals	(90)	(7)
Net fair value losses	(3,034)	(644)


Net book amount	108,278	13,404


At 31 December 2022
Cost	66,412	7,541
Accumulated fair value gains	41,866	5,863


Net book amount	108,278	13,404

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

173

19. Investment property - continued


	Group	Company
	€’000	€’000

Year ended 31 December 2023
Opening net book amount	108,278	13,404
Additions	1,614	344
Net fair value losses	(4,273)	61


Net book amount	105,619	13,809


At 31 December 2023
Cost	68,026	7,885
Accumulated fair value gains	37,593	5,924


Net book amount	105,619	13,809

Transfers to or from property, plant & equipment and disposals are inclusive of

accumulated fair value gains at the point of transfer.

Fair value of land and buildings

A valuation of the Group’s and Company’s land and buildings was performed by

external qualified valuers to determine the fair value of the land and buildings as at 31

December 2023 and 2022. The fair value movements were credited to profit or loss and

are presented within ‘investment return’ (Note 8).

The Group’s and the Company’s investment property, comprising mainly office

buildings, have been determined to fall within level 3 of the fair valuation hierarchy.

The different levels in the fair value hierarchy have been defined in Note 4.3.

The Group’s and the Company’s policy is to recognise transfers into and out of fair

value hierarchy levels as of the date of the event or change in circumstances that caused

the transfer. There were no transfers between levels during the year.

Valuation processes

On an annual basis, the Group and Company engage external, independent property

valuers, having appropriate recognised professional qualifications and recent

experience in the location and category of the properties being valued to determine the

fair value of the land and buildings. As at 31 December 2023, the fair values of the land

and buildings have been determined by PwC Malta and DHI Periti.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

174

19. Investment property - continued

Valuation processes - continued

At each financial year end the investments department:

• verifies all major inputs to the valuation report prepared by the qualified valuer;

• assesses property valuation movements when compared to the prior year valuation

report; and

• holds discussions with the qualified valuer.

The valuation techniques used for investment properties were the discounted cash flow

valuation and market approach to provide accuracy and consistency in arriving at a fair

value that reflects a price that would be reasonably expected to be received in an

orderly transaction between market participants at the measurement date.

Valuation technique - Discounted cash flow

The following tables shows the valuation technique used in measuring the fair value of

investment property using the discounted cash flow technique, as well as the significant

unobservable inputs used. These inputs include:

Group


Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Discounted cash flows: The valuation model considers the present value of net cash flows generated from the property, taking into account the expected rental growth rate, void periods and costs not paid for by the tenants. The expected net cash flows are discounted using the risk- adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), lease terms, property risk premium and inflation.	– Risk-adjusted discount rate varying between 7.0%% and 8.6%% (2022: 5.7% and 8.1%%). – A void factor varying between 1.0% to 5.0% (2022: 1.5% and 6.5%) on rental income. – Lease market rate was applied once current lease terms expired. – Expected market rental growth rate of 2.0% (2022: 2.0%) in line with the general inflation rate – Construction costs for undeveloped airspace and re-developable land varying between €671/sqm and €1,592/sqm (2022: €656/ sqm and €1,535/sqm)	The estimated fair value would increase/(decrease) if: – The risk-adjusted discount rate were lower/ (higher); – Void factor were lower/ (higher); – The market rate were higher/(lower); – Expected market rental growth were higher/ (lower). – Constructions costs were lower/(higher).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

175

19. Investment property - continued

Valuation technique - Discounted cash flow - continued

Company


Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Discounted cash flows: The valuation model considers the present value of net cash flows generated from the property, taking into account the expected rental growth rate, void periods and costs not paid for by the tenants. The expected net cash flows are discounted using the risk- adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), lease terms, property risk premium and inflation.	– Risk-adjusted discount rate varying between 7.9% and 8.4% (2022: 7.1% and 7.9%). – A void factor of 4.5% (2022: 4.5%) on rental income. – Lease market rate was applied once current lease terms expired. – Expected market rental growth rate of 2.0% (2022: 1.6%) in line with general inflation rate.	The estimated fair value would increase/(decrease) if: – The risk-adjusted discount rate were lower/(higher); – Void factor were lower/ (higher); – The market rate were higher/(lower); – Expected market rental growth were higher/ (lower).

The fair value of investment property determined by external, qualified property

valuers on the basis of the discounted cash flow method amounted to €101.24 million

(2022: €103.64 million) for the Group and €12.47 million (2022: €12.13 million) for

the Company.

In 2022 the Company transferred back Property, plant and equipment having a value of

€0.45 million to Investment Property. During 2023, there were no transfers to or from

Investment Property.

Valuation technique – Residual and Market approach

One property held by the Group situated within the Grand Harbour Local Plan has been

valued using the Residual Method for the comparative period and the Market Approach

for the current year. The resultant value in 2023, based on the Residual Method, was

not reflective of the current real estate market given the market data available.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

176

19. Investment property - continued

Valuation technique – Residual and Market approach - continued

Consequently, in 2023, the property is valued with reference to parameters for

comparable properties in terms of either actual prices from recent transactions or

advertised prices for properties currently available for sale. Through the Market

Approach, the property is valued in its existing state.

The following table shows the valuation technique used in measuring the fair value of

this investment property using the residual value approach. These inputs include:

Residual Value Technique - 2022


Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Residual method: The valuation model comprises: (a) the estimation of the gross development value of the property in a redeveloped form by applying the investment method (income approach), on the basis of potential developed area on completion and a market rent (net of non-recoverable expenses) per square metre (sq.m.), capitalised using an equivalent yield; and deducting (b) estimated development costs incurred in relation to the demolition of existing buildings, design costs, infrastructure works, construction costs, professional fees and costs of letting and sale; and (c) a ‘developer’s profit’ representing an allowance for the risk of undertaking the development.	– Offices net internal area on completion 7,130 sq.m. – Annual net rental rate per sq.m. of office space €141 – Number of car spaces on completion 159 – Annual net rental rate per car space €816 – Capitalisation rate 6.4% – Net development costs €10.0m – Developer’s profit 15% – Planning uncertainty discount 10%	The estimated fair value would increase/(decrease) if: – Offices net internal area on completion were higher/ (lower); – Annual net rental rate per sqm of office space were higher/(lower); – Number of car spaces on completion were higher/ (lower); – Net rental rate per car space were higher/(lower); – Capitalisation rate were lower/ (higher); – Net development costs were lower/(higher); – Developer’s profit were lower/(higher); and – Planning uncertainty discount were lower/ (higher).

The fair value of investment property determined by external, qualified property

valuers on the basis of residual method amounted to €2.67 million for the Group in

2022.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

177

19. Investment property - continued

Valuation technique – Residual and Market approach - continued

Market Value Technique - 2023


Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Market value : The valuation model comprises: (a) the estimation of an average sales rate based on information obtained from either actual prices of recent transactions or advertised prices for properties currently available for sale.	– Average sales rate of €1,355/ sqm – Reduction in average sales rate of 70% to allow for potential negotiation in rates between what is being advertised to what is actually contracted.	The estimated fair value would increase/(decrease) if: – The average sale rate were higher/(lower); – The reduction in average sales rate were higher/ (lower);

The fair value of investment property determined by external, qualified property

valuers on the basis of market approach method amounted to €2.30 million for the

Group in 2023.

Valuation technique - Comparative transactions method

The fair value of the Group’s investment properties determined on the basis of the

market comparison method amounted to €0.7 million in 2023 and 2022. The

comparative method is based on an expected sales value per square metre based on an

average/ median of values derived from observable market transactions for comparable

properties.

Valuation technique - Income Capitalisation Method

The valuation for all other investment property with a total carrying amount of €1.34

million (2022: €1.27 million) for the Group and Company, was determined by

capitalising future net income streams based on significant unobservable inputs. These

inputs include:


	Future rental cash inflows	based on the actual location, type and quality of the properties and supported by the terms of any existing lease, other contracts or external evidence such as current market rents for similar properties;

	Capitalisation rates	based on actual location, size and quality of the properties and taking into account market data at the valuation date.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

178

19. Investment property - continued

Valuation technique - Income Capitalisation Method - continued

Information about fair value measurements using significant unobservable inputs (level

Group & Company


			Significant unobservable Inputs
	Fair value at 31 December 2023	Valuation technique	Rental value	Capitalisation rate
Description	€		€	%

Office buildings	1.34m	Capitalisation of future net income streams	0.05m	3.25-5.00

Group & Company


			Significant unobservable Inputs
Description	Fair value at 31 December 2022	Valuation technique	Rental value	Capitalisation rate
	€		€	%

Office buildings	1.27m	Capitalisation of future net income streams	0.05m	3.50-5.00

For each valuation for which rental value and capitalisation rate have been determined

to be the significant unobservable inputs, the higher the rental value and the lower the

capitalisation rate, the higher the fair value. Conversely, the lower the rental value and

the higher the capitalisation rate, the lower the fair value.

In the absence of future rental cash inflows, fair value is based on active market prices,

adjusted, if necessary for any difference in the nature, location or condition of the

specific asset.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

179

19. Investment property - continued

Sensitivity analysis

Sensitivity analysis was carried out to assess the impact of changing the risk-adjusted

discount rate (0.5 percentage point increase/decrease), or the market rental rate growth

(5.0 percentage point increase/decrease) in the case of the discounted cash flow,

residual method and market approach (5.0 percentage point increase/decrease), and the

capitalisation rate for the income capitalisation method. The tables below show the

changes in the valuation arising from such changes:

Group


	2023	2023	2022	2022
	-0.5%	+0.5%	-0.5%	+0.5%
	€ million	€ million	€ million	€ million

Discount rates	8.3	(7.3)	9.3	(8.0)

	2023	2023	2022	2022
	-5%	+5%	-5%	+5%
	€ million	€ million	€ million	€ million

Market rates	(5.4)	5.1	(5.4)	5.3

Company


	2023	2023	2022	2022
	-0.5%	+0.5%	-0.5%	+0.5%
	€ million	€ million	€ million	€ million

Discount rates	0.9	(0.9)	1.1	(0.9)

	2023	2023	2022	2022
	-5%	+5%	-5%	+5%
	€ million	€ million	€ million	€ million

Market rates	(0.6)	0.5	(0.5)	0.5

The impact on profit or loss would be a maximum increase of €8.3 million (2022: €9.3

million) or a maximum decrease of €7.3 million (2022: €8.0 million) for the Group and

a maximum increase of €0.9 million (2022: €1.1 million) or a maximum decrease of

€0.9 million (2022: €0.9 million) for the Company.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

180

20.Investment in subsidiary undertakings


		Company
		€’000

	Year ended 31 December 2023
	Opening net book amount	77,214


	Closing net book amount	77,214



	Year ended 31 December 2022
	Opening net book amount	77,214


	Closing net book amount	77,214

The subsidiary undertakings at 31 December are shown below:


Subsidiary undertakings	Registered office	Class of shares held	Percentage of shares held
			2023	2022
Euro Globe Holdings Limited (Company in liquidation)	Middle Sea House Floriana	Ordinary shares	100%	100%

Euromed Risk Solutions Limited	Development House Floriana	Ordinary shares	100%	100%

Bee Insurance Management Limited	Development House Floriana	Ordinary shares	100%	100%

MAPFRE MSV Life plc	Level 7 The Mall Floriana	Ordinary shares	50%	50%

Church Wharf Properties Limited	Middle Sea House Floriana	Ordinary shares	75%	75%

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

181

20.Investment in subsidiary undertakings - continued

The Group’s aggregated assets and liabilities and the results of its subsidiary

undertakings that have non-controlling interest, before elimination entries, are as

follows:


2023	% Held by non- controlling interests	Assets	Liabilities	Revenues	Profit before tax	Net cash
		€’000	€’000	€’000	€’000	€’000

MAPFRE MSV Life p.l.c.	50%	2,319,702	2,154,321	201,271	14,572	(88,713)

Church Wharf
Properties Limited	25%	2,301	325	—	(400)	—


2022	% Held by non- controlling interests	Assets	Liabilities	Revenues	Profit before tax	Net cash
		€’000	€’000	€’000	€’000	€’000

MAPFRE MSV Life p.l.c.
(consolidated results)
restated	50%	2,273,409	2,117,206	254,910	2,673	65,934

Church Wharf
Properties Limited	25%	2,674	333	—	8	(1)

The amount of dividends that can be distributed in cash by MAPFRE MSV Life p.l.c. is

restricted by the solvency requirements imposed by the MFSA Regulations.

In addition to the subsidiary undertakings above, MAPFRE MSV Life p.l.c. also held

the following investments in subsidiary undertakings:


Subsidiary undertakings	Registered office	Class of shares held	Percentage of shares held
			2023	2022
Growth Investment Limited (held indirectly by MAPFRE MSV Life p.l.c.)	Pjazza Papa Giovanni XXIII Floriana	Ordinary shares	50%	50%

During 2023 Growth Investments Limited was wound down and struck off.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

182

20.Investment in subsidiary undertakings - continued

During 2011, the Company acquired control of MAPFRE MSV Life p.l.c. following a

shareholders’ agreement. MAPFRE MSV Life p.l.c. had previously been accounted for

as an associated undertaking.

As a result of this business combination, Church Wharf Properties Limited, which was

previously classified as an associated undertaking, also became a subsidiary in view of

the fact that the remaining interest in this company is held by MAPFRE MSV Life

p.l.c.

As disclosed in prior years’ financial statements, the Company’s 100% holding in

Progress Assicurazioni S.p.A. (‘Progress’) was derecognised in 2009. This was due to

Progress being put into compulsory administrative liquidation. Subsequent bankruptcy

procedures were also initiated and accordingly, the investment was fully written off in

previous years. A subordinated loan receivable from Progress by a Group company

amounting to €8.50 million has also been fully provided for in previous years. A

scheme of distribution was communicated by the liquidator in 2021 which was

executed during 2022. A final payment of 6.35% of the subordinated loan receivable

was received by MAPFRE Middlesea p.l.c. amounting to €0.54 million. The Directors

are not aware of any developments that could have an impact on the Company’s

obligations attached to this investment.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

183

21. Investment in associated undertakings


	Group	Company
	€’000	€’000

At 1 January 2022
Cost	14,480	294
Accumulated share of associated undertaking's equity	89	89
Accumulated fair value movements	8,262	—


Net book amount	22,831	383


2022
Opening net book amount	22,831	383
Share of associated undertaking's movement in equity	6	6
Fair value movement	190	—


Closing net book amount	23,027	389


At 31 December 2022
Cost	14,480	294
Accumulated share of associated undertaking's equity	95	95
Accumulated fair value movements	8,452	—


Net book amount	23,027	389


Year ended 31 December 2023
Opening net book amount	23,027	389
Share of associated undertaking's movement in equity	14	14
Fair value movement	882	—


Closing net book amount	23,923	403


At 31 December 2023
Cost	14,480	294
Accumulated share of associated undertaking's equity	109	109
Accumulated fair value movements	9,334	—


Net book amount	23,923	403

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

184

21. Investment in associated undertakings - continued

The Group’s aggregated assets and liabilities and the share of the results of its

associated undertaking, which is unlisted is as follows:


2023	Registered office	Assets	Liabilities	Revenues	Profit	% of interest held
		€’000	€’000	€’000	€’000

Middlesea Assist Limited	4D, Development House,
	St. Anne Street,
	Floriana	1,423	600	3,063	224	49%


2022	Registered office	Assets	Liabilities	Revenues	Profit	% of interest held
		€’000	€’000	€’000	€’000

Middlesea Assist Limited	4D, Development House,
	St. Anne Street,
	Floriana	1,456	662	2,863	195	49%

In addition to the associated undertakings above, MAPFRE MSV Life p.l.c. also held

the following investments in associated undertakings:


Associated undertakings	Registered office	Class of shares held	Percentage of shares held
			MSV		Group
			2023	2022	2023	2022

Plaza Centres p.l.c.	The Plaza Commercial Centre
	Bisazza Street Sliema	Ordinary shares	31.42%	31.42%	31.42%	31.42%

Tigne Mall	The PointShoppin g Mall
	Tigne Point Sliema	Ordinary shares	35.46%	35.46%	35.46%	35.46%

Plaza Centres p.l.c. and Tigne Mall p.l.c. are listed on the Malta Stock Exchange and

their share price as at 31 December 2023 was €0.68 and €0.90 respectively (31

December 2022: €0.73 and €0.84 respectively).

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

185

22. Other investments

The investments are summarised by measurement category in the table below.


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Fair value through profit or loss	1,971,728	1,856,734	2,486	1,789
Other available-for-sale	—	10,308	—	10,308
Fair value through OCI	13,804	—	13,804	—
Loans and receivables	—	116,728	—	—
Amortised Cost	150,781	—	—	—


	2,136,313	1,983,770	16,290	12,097

(a) Investments at fair value through profit or loss

Analysed by type of investment as follows:


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Equity securities, and units in unit trusts	960,157	973,927	2,486	1,186
Debt securities	849,061	777,854	—	603
Assets held to cover linked liabilities
- collective investment schemes	160,540	102,255	—	—
Forward foreign exchange contracts	1,970	2,698	—	—


Total investments at fair value through profit or loss	1,971,728	1,856,734	2,486	1,789

At 31 December 2023, the Group had €35.8 million financial commitments in respect

of uncalled capital (2022: €66.1 million).

Equity securities and collective investment schemes are considered to be substantially

non-current assets in nature.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

186

22. Other investments - continued

(a) Investments at fair value through profit or loss - continued

The movements for the year are summarised as follows:


	Group	Company
	Fair value through profit & loss	Fair value through profit & loss
	€’000	€’000

Year ended 31 December 2022
Opening net book amount	2,201,982	2,151
Additions	1,312,024	—
Disposals	(1,452,223)	—
Net fair value losses	(205,049)	(362)


Closing net book amount	1,856,734	1,789


Year ended 31 December 2023
Opening net book amount	1,856,734	1,789
Reclassified from AFS	570	570
Reclassified to FVOCI	(603)	(603)
Additions	1,499,134	—
Disposals	(1,514,034)	—
Net fair value gains (excluding net realised gains)	122,094	730
Movement in accrued interest receivable	1,879	—
Accrued interest on initial application of IFRS 9	5,954	—


Closing net book amount	1,971,728	2,486

The maturity of fixed income debt securities is detailed below;


	Group		Company
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Within one year	25,650	58,337	—	—
Between 1 and 2 years	50,064	76,751	—	—
Between 2 and 5 years	238,481	194,953	—	—
Over 5 years	534,866	447,813	—	603


	849,061	777,854	—	603

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

187

22. Other investments - continued

(b) Other available-for-sale


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Listed debt securities:	—	9,738	—	9,738
Listed equity securities:	—	570	—	570


	—	10,308	—	10,308

The movement for the year is summarised as follows:


Fixed income securities
	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Year ended 31 December
Opening net book amount	9,738	5,579	9,738	5,579
Reclassified to FVOCI	(9,738)	—	(9,738)	—
Additions	—	5,135	—	5,135
Disposals	—	(203)	—	(203)
Net fair value losses	—	(773)	—	(773)


Closing net book amount	—	9,738	—	9,738


Equity
	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000
Year ended 31 December
Opening net book amount	570	652	570	652
Reclassified to FVTPL	(570)	—	(570)	—
Net fair value losses	—	(82)	—	(82)


Closing net book amount	—	570	—	570

Equity and debt securities are classified as non-current. The maturity of fixed income

debt securities is summarised below:

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

188

22. Other investments - continued

(b) Other available for sale - continued


	Group		Company
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Within one year	—	—	—	—
Between 1 and 2 years	—	854	—	854
Between 2 and 5 years	—	6,962	—	6,962
Over 5 years	—	1,922	—	1,922


	—	9,738	—	9,738

(c)Fair value through OCI


	Group		Company
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Listed debt securities	13,804	—	13,804	—


	13,804	—	13,804	—

The movement for the year is summarised as follows:


Listed debt securities
	Group		Company
	2023	2022	2023	2022
	€'000	€'000	€'000	€'000
Year ended 31 December
Reclassified from AFS	9,738	—	9,738	—
Reclassified from FVTPL	603	—	603	—
Additions	3,530	—	3,530	—
Disposals	(379)	—	(379)	—
Net fair value gains	312	—	312	—


Closing net book amount	13,804	—	13,804	—

Debt securities are classified as non-current. The maturity of fixed income debt

securities is summarised below:

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

189

22. Other investments - continued

(c)Fair value through OCI - continued


	Group		Company

	2023	2022	2023	2022
	€'000	€'000	€'000	€'000

Within one year	3,847	—	3,847	—
Between 1 and 2 years	4,668	—	4,668	—
Between 2 and 5 years	2,772	—	2,772	—
Over 5 years	2,517	—	2,517	—


	13,804	—	13,804	—


Rating of fixed income debt securities
	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

AAA	1,366	—	1,366	—
AA	2,821	—	2,821	—
A	5,541	—	5,541	—
BBB	4,076	—	4,076	—
BB or lower	—	—	—	—


	13,804	—	13,804	—

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

190

22.Other investments - continued

(d)Loans and receivables


	Group
	2023	2022
		Restated
	€'000	€'000

Deposits with banks or credit institutions	—	116,728


	—	116,728


Maturity of deposits with banks or credit institutions:

	Group
	2023	2022
	€'000	€'000

Within 3 months	—	19,564
Within 1 year but exceeding 3 months	—	76,527
Between 1 and 5 years	—	20,637


	—	116,728


The above deposits earn interest as follows:

	Group
	2023	2022
	€'000	€'000

At fixed rates	—	116,728


	—	116,728

(e)Amortised cost

Analysed by type of investment as follows:


		Group
		2023
		€'000

	Deposits with banks or credit institutions	75,977
	Debt securities	74,804


		150,781

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

191

22.Other investments - continued

(e)Amortised cost

Analysed by type of investment as follows:


		Group
		2023
		€'000

	The movements for the year are summarised as follows:

	Opening reclassification from loans and receivables (Note 22 (d))	116,728
	ECL on initial application of IFRS 9	(134)
	Accrued interest on initial application of IFRS 9	394
	Interest income earned	4,818
	Interest income collected	(3,032)
	Additions	264,821
	Redemptions and disposals	(232,792)
	ECL	(22)


	Closing net book amount	150,781



	Maturity of investments at amortised cost:
		Group
		2023
		€'000

	Within 3 months	61,159
	Within 1 year but exceeding 3 months	10,009
	Between 1 and 5 years	71,431
	Over 5 years	8,182


		150,781



	The above investments earn interest as follows:	Group
		2023
		€'000

	At fixed rates	150,781


		150,781

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

192

23. Deferred income tax


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Balance at 1 January	10,038	40,286	1,644	721
Initial application of IFRS 17	—	11,827	—	429
Initial application of IFRS 9	(66)	—	(19)	—

Movements during the year:
Profit or loss account (Note 12)	2,015	(42,044)	(412)	525
Other comprehensive income	(26)	(31)	(26)	(31)


Balance at 31 December - net	11,961	10,038	1,187	1,644

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

193

23.Deferred income tax - continued

Deferred income taxes are calculated on all temporary differences using a principal tax

rate of 35% (2022: 35%) with the exception of investment property and freehold and

other property, for which deferred income taxes may be calculated using a principal tax

rate of 8% or 10% of the carrying amount (2022: 8% or 10%), if appropriate. The

analysis of deferred tax (assets)/liabilities is as follows:


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Temporary differences on property, plant and equipment	5,627	4,365	1,127	991
Temporary differences attributable to investment property, unrealised capital losses and fair value adjustments on financial assets	10,455	752	1,182	1,082
Temporary differences attributable to unabsorbed tax losses and allowances carried forward	(3,878)	(1,908)	(933)	(933)
Temporary differences attributable to other provisions	(243)	(137)	(189)	(138)
Initial application of IFRS 17	—	6,966	—	642


Balance at 31 December - net	11,961	10,038	1,187	1,644

Deferred income tax assets and liabilities are offset when there is a legally enforceable

right to set off a current tax asset against a current tax liability. The following amounts

determined after appropriate offsetting are shown in the statement of financial position:


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Deferred tax asset	(2,118)	(8,750)	(1,260)	(1,292)
Deferred tax liability	14,079	18,788	2,447	2,936


	11,961	10,038	1,187	1,644

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

194

23.Deferred income tax - continued

The deferred income tax assets and liabilities are, principally, recoverable after more

than 12 months.

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that

the realisation of the related tax benefit through future taxable profits is probable.

The Group and Company have unutilised capital gains of €23.22 million (2022: €27.93

million), which give rise to a deferred tax asset of €8.13 million (2022: €9.78 million)

that has not been recognised in these financial statements. The Group also has

unutilised trading losses of €2.48 million (2022: €2.48 million) giving rise to a deferred

tax asset of €0.87 million (2022: €0.87 million) which has not been recognised in these

financial statements.

The Group’s and Company’s deferred tax asset and liability were established on the

basis of tax rates that were substantively enacted as at the financial year end.

24. Insurance contract assets, insurance contract liabilities, reinsurance contract assets

and reinsurance contract liabilities

24.1 Composition of statement of financial position

An analysis of the amounts presented on the statement of financial position for

insurance contracts assets, insurance contract liabilities, reinsurance contract assets and

reinsurance contract liabilities, is shown in the table below:


Group	Life Risk	Investment Contracts with DPF	Total long- term business	Short-term Under PAA	Total
	€’000	€’000	€’000	€’000	€’000

As at 31 December 2023

Insurance contract assets	8,945	—	8,945	—	8,945
Insurance contract liabilities	6,488	1,984,889	1,991,377	72,467	2,063,844
Reinsurance contract assets	—	—	—	13,359	13,359
Reinsurance contract liabilities	15,493	—	15,493	—	15,493

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

195

24. Insurance contract assets, insurance contract liabilities, reinsurance contract assets

and reinsurance contract liabilities - continued

24.1 Composition of statement of financial position - continued


Group	Life Risk	Investments Contracts with DPF	Total long- term business	Short-term Under PAA	Total
	€’000	€’000	€’000	€’000	€’000

As at 31 December 2022

Insurance contract assets	8,400	—	8,400	—	8,400
Insurance contract liabilities	6,357	1,961,452	1,967,809	82,964	2,050,773
Reinsurance contract assets	—	—	—	23,590	23,590
Reinsurance contract liabilities	10,750	—	10,750	—	10,750


Company
	2023	2022
	€’000	€’000

Insurance contract liabilities	72,467	82,964
Reinsurance contract assets	13,359	23,590

Insurance liabilities and reinsurance assets in relation to short-term insurance contracts

are classified as current liabilities, in that, liability for incurred claims represent events

that happened and which would normally be settled within the normal operating cycle.

The timing of payment can be dependent on factors, like court cases, that could defer

such payment to beyond a year from the reporting date. Insurance and investment

contract liabilities in relation to long-term contracts are substantially non-current.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

196

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA

Reconciliation of the liability for remaining coverage and the liability for incurred claims

The following tables present reconciliations from the opening to the closing balances of the

liability for remaining coverage (LRC) and liability for incurred claims (LIC).


Group and Company	2023
	LRC		LIC
	Excluding loss component	Loss component	Present value of future cash flows	Risk adjustment for non- financial risk	Total
	€’000	€’000	€’000	€’000	€’000

Insurance contracts liabilities at 1 January	29,789	402	51,374	1,399	82,964


Insurance revenue	(92,869)	—	—	—	(92,869)


Insurance service expenses
Incurred claims and other directly attributable expenses	—	—	50,008	445	50,453
Changes that relate to past service - changes in FCF relating to the LIC	—	—	(8,121)	(869)	(8,990)
Losses on onerous contracts and reversals of those losses	—	(402)	—	—	(402)
Insurance acquisition cash flows amortisation	27,394	—	—	—	27,394


Insurance service expenses	27,394	(402)	41,887	(424)	68,455


Insurance service result	(65,475)	(402)	41,887	(424)	(24,414)
Finance expenses from insurance contracts issued	—	—	1,285	35	1,320


Total amount recognised in comprehensive income	(65,475)	(402)	43,172	(389)	(23,094)


Cash flows
Premiums received	95,723	—	—	—	95,723
Claims and other directly attributable expenses paid	—	—	(55,110)	—	(55,110)
Insurance acquisition cash flows	(28,016)	—	—	—	(28,016)


Total cash flows	67,707	—	(55,110)	—	12,597


Insurance contracts liabilities at 31 December	32,021	—	39,436	1,010	72,467


Insurance contracts liabilities at 31 December	32,021		40,446		72,467

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

197

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA - continued

Reconciliation of the liability for remaining coverage and the liability for incurred

claims - continued


Group and Company	2022
	LRC		LIC
	Excluding loss component	Loss component	Present value of future cash flows	Risk adjustment for non- financial risk	Total
	€’000	€’000	€’000	€’000	€’000

Insurance contracts liabilities at 1 January	28,589	447	51,585	1,449	82,070


Insurance revenue	(84,350)	—	—	—	(84,350)


Insurance service expenses
Incurred claims and other directly attributable expenses	—	—	46,735	513	47,248
Changes that relate to past service - changes in FCF relating to the LIC	—	—	1,891	(490)	1,401
Losses on onerous contracts and reversals of those losses	—	(45)	—	—	(45)
Insurance acquisition cash flows amortisation	24,079	—	—	—	24,079


Insurance service expenses	24,079	(45)	48,626	23	72,683


Insurance service result	(60,271)	(45)	48,626	23	(11,667)
Finance expenses from insurance contracts issued	—	—	(2,531)	(73)	(2,604)


Total amount recognised in comprehensive income	(60,271)	(45)	46,095	(50)	(14,271)


Cash flows
Premiums received	86,824	—	—	—	86,824
Claims and other directly attributable expenses paid	—	—	(46,306)	—	(46,306)
Insurance acquisition cash flows	(25,353)	—		—	(25,353)


Total cash flows	61,471	—	(46,306)	—	15,165


Insurance contracts liabilities at 31 December	29,789	402	51,374	1,399	82,964


Insurance contracts liabilities at 31 December	30,191		52,773		82,964

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

198

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA - continued

Reconciliation of the asset for remaining coverage and the asset for incurred claims

The following tables present reconciliations from the opening to the closing balances of the

asset for remaining coverage (ARC) and asset for incurred claims (AIC).

Group and Company


	2023
	ARC	AIC
	Remaining coverage excluding loss component	Present value of future cash flows	Risk adjustment for non- financial risk	Total
	€’000	€’000	€’000	€’000

Reinsurance contracts assets at 1 January	1,250	21,683	657	23,590

Net income/(expense) from reinsurance contracts held
Reinsurance expenses	(11,326)	—	—	(11,326)
Incurred claims recovery	—	4,635	127	4,762
Changes that relate to past service - changes in FCF relating to the LIC	—	(5,202)	(532)	(5,734)
Effect of changes in the risk of reinsurers' non- performance	—	51	—	51


Net expense from reinsurance contracts held	(11,326)	(516)	(405)	(12,247)
Finance income from reinsurance contracts held	—	471	15	486


Total amount recognised in comprehensive income	(11,326)	(45)	(390)	(11,761)


Cash flows
Premiums paid net of ceding commissions and other directly attributable expenses paid	12,701	—	—	12,701
Recoveries from reinsurance	—	(11,171)	—	(11,171)


Total cash flows	12,701	(11,171)	—	1,530


Reinsurance contracts assets at 31 December	2,625	10,467	267	13,359

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

199

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA - continued

Reconciliation of the asset for remaining coverage and the asset for incurred claims -

continued


Group and Company	2022
	ARC	AIC
	Remaining coverage excluding loss component	Present value of future cash flows	Risk adjustment for non- financial risk	Total
	€’000	€’000	€’000	€’000

Reinsurance contracts assets at 1 January	297	24,883	779	25,959


Net income/(expense) from reinsurance contracts held
Reinsurance expenses	(10,964)	—	—	(10,964)
Incurred claims recovery	—	8,220	198	8,418
Changes that relate to past service - changes in FCF relating to the LIC	—	(3,027)	(286)	(3,313)
Effect of changes in the risk of reinsurers' non- performance	—	133	—	133


Net income/(expense) from reinsurance contracts held	(10,964)	5,326	(88)	(5,726)
Finance expense from reinsurance contracts held	—	(1,025)	(34)	(1,059)


Total amount recognised in comprehensive income	(10,964)	4,301	(122)	(6,785)


Cash flows
Premiums paid net of ceding commissions and other directly attributable expenses paid	11,917	—	—	11,917
Recoveries from reinsurance	—	(7,501)	—	(7,501)


Total cash flows	11,917	(7,501)	—	4,416


Reinsurance contracts assets at 31 December	1,250	21,683	657	23,590

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

200

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA - continued

Short-term insurance contracts – liability for incurred claims

The gross claims reported are net of expected recoveries from salvage and subrogation.

The liability for incurred claims are largely based on claims incurred data. A Chain

Ladder approach using the Development Factor Method has been used projecting

separately each portfolio of contracts. In choosing the development factors, outliers that

would unrealistically favourably or adversely impact the estimation of the ultimate cost

are excluded. Large losses within each portfolio other than for Motor have not been

projected given the small and infrequent number of such claims over time and have

been taken at the case reserve. In the case of Motor, large losses, in the main involving

fatalities or serious bodily injury, are projected separately from attritional claims given

their severity and different development patterns.

The development tables in this note give an indication of the time it takes to settle

certain claims. This is attributable to certain classes of business taking several years to

develop and is also due to the length of time it takes for the respective cases to be

resolved in court.

The top half of the tables below illustrates how the Company’s estimate of the ultimate

total undiscounted claims cost for each accident year has changed at successive year-

ends on a gross and net basis. The bottom half of the table reconciles the cumulative

claims to the amount appearing in the statement of financial position on a gross and net

basis. The accident-year basis is the most appropriate for the general business written

by the Company.

The Group provides separately information on the gross and net basis the claims

development for the current reporting period and nine years prior to it. The diagonals

for financial years 2021, 2022 and 2023 show the undiscounted projected ultimate

claims incurred inclusive of claims related expenses as restated upon implementation of

IFRS 17. The directors have considered that this does not detract the user from adequate

information as to how the claims have evolved from the particular accident year to the

current reporting period.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

201

24.Insurance contract assets, insurance contract liabilities, reinsurance contract assets and reinsurance contract liabilities -

continued

24.2 Short-term insurance contracts under PAA - continued

Insurance contracts under the PAA – gross liability for incurred claims


Group and Company

Accident Year	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	TOTAL
	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000
Estimate of ultimate claims cost:(undiscounted, inclusive of other directly attributable expenses)
- at end of accident year	22,779	26,677	34,704	38,545	43,006	43,700	32,634	37,770	42,727	44,496
- one year later	20,198	26,748	35,127	39,334	44,264	47,172	32,240	37,618	41,788	—
- two years later	19,500	27,591	33,780	39,377	44,724	47,326	32,727	35,321	—	—
- three years later	19,430	27,946	33,211	39,741	45,831	49,511	32,333	—	—	—
- four years later	19,322	27,665	33,159	38,328	46,109	48,483	—	—	—	—
- five years later	19,284	27,605	33,045	38,099	46,392	—	—	—	—	—
- six years later	19,092	27,908	32,750	37,715	—	—	—	—	—	—
- seven years later	19,112	27,789	31,792	—	—	—	—	—	—	—
- eight years later	19,776	25,413	—	—	—	—	—	—	—	—
- nine years later	19,684	—	—	—	—	—	—	—	—	—

Current estimate of cumulative claims	19,684	25,413	31,792	37,715	46,392	48,483	32,333	35,321	41,788	44,496	363,417
Cumulative payments to date	(18,474)	(24,967)	(31,545)	(36,651)	(42,287)	(46,046)	(30,627)	(32,570)	(36,116)	(25,657)	(324,940)


Cumulative claims liabilities – accident years from 2014 to 2023	1,210	446	247	1,064	4,105	2,437	1,706	2,751	5,672	18,839	38,477
Claims liabilities – prior accident years											1,419
Claims liabilities – Group life											866
Effect of discounting											(1,326)


Liability for incurred claims for the contracts originated											39,436

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

202

24.Insurance contract assets, insurance contract liabilities, reinsurance contract assets and reinsurance contract liabilities -

continued

24.2 Short-term insurance contracts under PAA - continued

Insurance contracts net of reinsurance contracts assets under the PAA – net liability for incurred claims


Group and Company

Accident year	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	TOTAL
	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000	€’000
Estimate of ultimate claims cost:(undiscounted, inclusive of other directly attributable expenses)
- at end of accident year	17,776	23,216	30,079	33,106	33,539	33,848	28,126	34,463	39,334	40,287
- one year later	16,060	23,350	30,320	33,951	33,645	35,714	27,881	34,094	38,818	—
- two years later	15,565	22,442	29,171	33,638	33,846	36,367	28,372	32,035	—	—
- three years later	15,608	22,786	28,863	33,325	32,704	37,032	28,358	—	—	—
- four years later	15,611	22,551	29,038	32,961	32,524	36,587	—	—	—	—
- five years later	15,420	22,489	28,994	32,732	33,182	—	—	—	—	—
- six years later	15,247	22,596	28,746	32,680	—	—	—	—	—	—
- seven years later	15,220	22,707	28,382	—	—	—	—	—	—	—
- eight years later	15,388	22,420	—	—	—	—	—	—	—	—
- nine years later	15,392	—	—	—	—	—	—	—	—	—

Current estimate of cumulative claims	15,392	22,420	28,382	32,680	33,182	36,587	28,358	32,035	38,818	40,287	308,141
Cumulative payments to date	(14,992)	(22,076)	(28,204)	(31,902)	(32,917)	(35,694)	(26,774)	(29,628)	(33,615)	(24,316)	(280,118)


Cumulative claims liabilities – accident years from 2014 to 2023	400	344	178	778	265	893	1,584	2,407	5,203	15,971	28,023
Claims liabilities – prior accident years											1,195
Claims liabilities – Group life											730
Effect of discounting											(979)


Liability for incurred claims for the contracts originated											28,969

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

203

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA - continued

(a) Assumptions

Discount rates

The bottom-up approach was adopted by the Group in determining a suitable discount

rate. Under this approach, the discount rate is determined as the risk-free yield. Given

the short-term nature of its insurance contracts liabilities and liquidity of cash flows, the

Group has selected the risk-free rates as published by EIOPA as appropriate for the

nature of its liabilities taking a zero illiquidity premium.

The yield curves used to discount the estimates of future cash flows that do not vary

based on the returns of the underlying items are as follows:


	2023			2022
	No. of years			No. of years
	1	5	10	1	5	10


Short term insurance contracts issued and reinsurance contracts held	3.4%	2.3%	2.4%	3.2%	3.1%	3.1%

Risk adjustment for non-financial risk

Non-financial risk adjustment valuation reflects the compensation that the Group needs

to manage uncertainty regarding the amount and timing of future cash outflows, which

arise from non-financial risks from fulfilling insurance contract obligations.

Underwriting risks as well as other non-financial risks like portfolio expenses and

lapses are taken into consideration when determining this.

The non-financial risk adjustment has been estimated using a confidence-interval-based

approach, using Value at Risk (VaR) metrics for the probability distribution of the

current value of future cash flows, in line with Solvency II capital requirements, and

calibrating the target percentile confidence interval to 65 percentile. The Group

estimates an adjustment for non-financial risk separately from all other estimates.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

204

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.2 Short-term insurance contracts under PAA - continued

(a) Assumptions - continued

Estimates of future cash flows to fulfil insurance contracts

LIC of short-term business insurance contracts, measured under the PAA, comprise of

the estimates of future cash flows. The estimates of future cash flows is derived using a

standard actuarial claims projection technique, the Chain Ladder method, other than for

the claims reserves as explained below. The key assumptions underlying this technique

is that past claims development experience can be used to project future claims

development.

Claims reserves which are not projected using actuarial techniques, particularly those

involving fatalities and/or serious bodily injuries, are reserved at the case-by-case

reserve estimate. The measurement of claim payments due by the Group involves the

assessment of future settlements and is therefore dependent on assumptions around

determining such reserves based on, among others, legal precedent and current trends in

compensation awards.

(b) Sensitivity analysis

The directors have considered the sensitivity of the key variables underlying the liability

for short-term contracts. The most sensitive assumptions are the development factors

and discount rate changes. Development factors can be impacted by claims inflation,

increase in claims frequency and severity. Sensitivity analysis for insurance risk has

been disclosed in Note 4. Sensitivity analysis for interest rate risk has also been

disclosed in Note 4.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

205

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.3 Long-term insurance contracts - Life risk

Reconciliation of the liability for remaining coverage and the liability for incurred

claims

The following tables present reconciliations from the opening to the closing balances of

the LRC and LIC excluding any insurance acquisition cash flows assets and other pre-

recognition cash flows.


Group	2023
	LRC excluding Loss component	LIC	Total
	€’000	€’000	€’000

Insurance Contracts assets at 1 January	(9,423)	1,023	(8,400)
Insurance Contract liabilities at 1 January	6,281	76	6,357


Insurance revenue	(13,043)	—	(13,043)

Insurance service expenses
Incurred claims and other directly attributable expenses	—	5,471	5,471
Insurance acquisition cash flows amortization	51	—	51


Insurance service expenses	51	5,471	5,522


Insurance service result	(12,992)	5,471	(7,521)


Finance expenses from insurance contracts issued	(2,648)	—	(2,648)


Total amounts recognised in profit and loss	(15,640)	5,471	(10,169)


Investment components	(575)	575	—

Cash flows
Premium received	15,510	—	15,510
Claims and other directly attributable expenses	—	(5,357)	(5,357)
Insurance acquisition cash flows	(398)	—	(398)


Total cash flows	15,112	(5,357)	9,755


Insurance Contract assets at 31 December	(10,686)	1,741	(8,945)
Insurance Contract liabilities at 31 December	6,441	47	6,488

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

206

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.3 Long-term insurance contracts - Life risk - continued

Reconciliation of the liability for remaining coverage and the liability for incurred

claims - continued


Group	2022
	LRC excluding Loss component	LIC	Total
	€’000	€’000	€’000

Insurance Contract assets at 1 January	(19,822)	1,836	(17,986)
Insurance Contract liabilities at 1 January	7,553	244	7,797


Insurance revenue	(11,871)	—	(11,871)

Insurance service expenses
Incurred claims and other directly attributable expenses	—	4,538	4,538
Changes that relate to past service – changes in the FCF relating to the LIC	—	(2)	(2)
Insurance acquisition cash flows amortization	67	—	67


Insurance service expenses	67	4,536	4,603


Insurance service result	(11,804)	4,536	(7,268)


Finance income from insurance contracts issued	6,656	—	6,656


Total amounts recognised in comprehensive income	(5,148)	4,536	(612)


Investment components	(502)	502	—

Cash flows
Premium received	15,128	—	15,128
Claims and other directly attributable expenses	—	(6,019)	(6,019)
Insurance acquisition cash flows	(351)	—	(351)


Total cash flows	14,777	(6,019)	8,758


Insurance Contracts assets at 31 December	(9,423)	1,023	(8,400)
Insurance Contract liabilities at 31 December	6,281	76	6,357

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

207

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.3 Long-term insurance contracts - Life risk - continued

Reconciliation of the measurement components of insurance contract balances


Group	2023
Life Risk – Insurance contracts issued	Present value of future cash flows	Risk adjustment for non- financial risk	CSM	Total
	€’000	€’000	€’000	€’000

Insurance Contracts assets at January	(46,144)	13,269	24,475	(8,400)
Insurance Contract liabilities at January	6,357	—	—	6,357


Changes that relate to current service
CSM recognised for the services provided	—	—	(3,589)	(3,589)
Change in the risk adjustment for non- financial risk for risk expired	—	(1,397)	—	(1,397)
Experience adjustment	(2,535)	—	—	(2,535)


	(2,535)	(1,397)	(3,589)	(7,521)


Changes that relate to future service
Changes in estimates that adjust the CSM	(11,341)	1,872	9,469	—
Contracts initially recognised in the period	(2,695)	1,161	1,534	—


	(14,036)	3,033	11,003	—




Insurance service result	(16,571)	1,636	7,414	(7,521)


Finance income from insurance contracts issued	(2,953)	—	305	(2,648)


Total amounts recognised in comprehensive income	(19,524)	1,636	7,719	(10,169)


Cash flows
Premium received	15,510	—	—	15,510
Claims and other directly attributable expenses paid	(5,357)	—	—	(5,357)
Insurance acquisition cash flows	(398)	—	—	(398)


Total cash flows	9,755	—	—	9,755


Insurance Contract assets at 31 December	(56,044)	14,905	32,194	(8,945)
Insurance Contract liabilities at 31 December	6,488	—	—	6,488

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

208

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.3 Long-term insurance contracts - Life risk - continued

Reconciliation of the measurement components of insurance contract balances - continued


Group	2022
Life Risk – Insurance contracts issued	Present value of future cash flows	Risk adjustment for non- financial risk	CSM	Total
	€’000	€’000	€’000	€’000

Insurance Contract assets at 1 January	(56,783)	15,883	22,914	(17,986)
Insurance Contract liabilities at 1 January	7,797	—	—	7,797


Changes that relate to current service
CSM recognised for the services provided	—	—	(2,624)	(2,624)
Change in the risk adjustment for non- financial risk for risk expired	—	(1,783)	—	(1,783)
Experience adjustment	(2,859)	—	—	(2,859)


	(2,859)	(1,783)	(2,624)	(7,266)


Changes that relate to future service
Changes in estimates that adjust the CSM	181	(1,957)	1,776	—
Contracts initially recognised in the period	(3,345)	1,126	2,219	—


	(3,164)	(831)	3,995	—


Changes that relate to past service
Changes that relate to past service – changes in FCF relating to LIC	(2)	—	—	(2)


Insurance service result	(6,025)	(2,614)	1,371	(7,268)


Finance income/ (expense) from insurance contracts issued	6,466	—	190	6,656


Total amounts recognised in comprehensive income	441	(2,614)	1,561	(612)


Cash flows
Premium received	15,128	—	—	15,128
Claims and other directly attributable expenses paid	(6,019)	—	—	(6,019)
Insurance acquisition cash flows	(351)	—	—	(351)


Total cash flows	8,758	—	—	8,758


Insurance Contract assets at 31 December	(46,144)	13,269	24,475	(8,400)
Insurance Contract liabilities at 31 December	6,357	—	—	6,357

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

209

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.3 Long-term insurance contracts - Life risk - continued

Impact of contracts recognised in the year


Group	2023	2022
	Non-onerous contracts originated	Non-onerous contracts originated
	€’000	€’000

Estimates of present value of future cash outflows
- Insurance acquisition cash flows	383	324
- Claims and other directly attributable expense	7,088	6,617


	7,471	6,941
Estimates of the present value of future cash inflows	(10,166)	(10,286)
Risk adjustment for non-financial risk adjustment	1,161	1,126
CSM	1,534	2,219


Increase in insurance contract liabilities from contracts recognised in the period	—	—

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

210

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.4 Life risk - Reinsurance contracts held

Reconciliation of the remaining coverage and incurred claims


Group	2023			2022
	Remaining coverage			Remaining coverage
	Excluding Loss- Recovery Component	Incurred Claims	Total	Excluding Loss- Recovery Component	Incurred Claims	Total
	€’000	€’000	€’000	€’000	€’000	€’000

Reinsurance contract liabilities at 1 January	14,239	(3,489)	10,750	25,377	(5,406)	19,971


Net expenses from reinsurance contracts held
Reinsurance expenses	4,189	—	4,189	2,892	—	2,892
Other directly attributable expenses	—	382	382	—	303	303
Incurred claims recovery	—	(974)	(974)	—	(1,050)	(1,050)


Net income (expenses) from reinsurance contracts held	4,189	(592)	3,597	2,892	(747)	2,145
Finance expenses/ (income) from reinsurance contracts held	2,713	—	2,713	(6,994)	—	(6,994)


Total amounts recognised in comprehensive income	6,902	(592)	6,310	(4,102)	(747)	(4,849)


Cash flows
Premium paid net of ceding commission and other directly attributable expenses paid	(1,970)	(382)	(2,352)	(7,036)	(303)	(7,339)
Recoveries from reinsurance	—	785	785	—	2,967	2,967


Total cash flows	(1,970)	403	(1,567)	(7,036)	2,664	(4,372)


Reinsuance contract liabilities at 31 December	19,171	(3,678)	15,493	14,239	(3,489)	10,750

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

211

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.4 Life risk - Reinsurance contracts held - continued

Reconciliation of the measurement components of reinsurance contract balances


Group	2023
	Present value of future cash flows	Risk adjustment for non- financial risk	CSM	Total
	€’000	€’000	€’000	€’000

Reinsurance contract liabilities at 1 January	25,404	(4,800)	(9,854)	10,750


Changes that relate to current service
CSM recognised for the services received	—	—	1,516	1,516
Change in the risk adjustment for non- financial risk for risk expired	—	242	—	242
Experience adjustment – relating to incurred claims and other directly attributable expenses recovery and reinsurance premium	1,839	—	—	1,839


	1,839	242	1,516	3,597


Changes that relate to future service
Changes in estimates that adjust the CSM	5,186	(841)	(4,345)	—
Contracts initially recognised in the period	400	(227)	(173)	—


	5,586	(1,068)	(4,518)	—





Finance expenses/(income) from reinsurance contracts held	2,819	—	(106)	2,713


Total amounts recognised in comprehensive income	10,244	(826)	(3,108)	6,310


Cash flows
Premium paid net of ceding commission and other directly attributable expenses paid	(2,352)	—	—	(2,352)
Recoveries from insurance	785	—	—	785


Total cash flows	(1,567)	—	—	(1,567)


Reinsurance contract liabilities at 31 December	34,081	(5,626)	(12,962)	15,493

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

212

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.4 Life risk - Reinsurance contracts held - continued

Reconciliation of the measurement components of reinsurance contract balances -

continued


Group	2022
	Present value of future cash flows	Risk adjustment for non- financial risk	CSM	Total
	€’000	€’000	€’000	€’000

Reinsurance contract liabilities at 1 January	35,704	(5,947)	(9,786)	19,971


Changes that relate to current service
CSM recognised for the services received	—	—	1,141	1,141
Change in the risk adjustment for non- financial risk for risk expired	—	355	—	355
Experience adjustment – relating to incurred claims and other directly attributable expenses recovery and reinsurance premium	649	—	—	649


	649	355	1,141	2,145


Changes that relate to future service
Changes in estimates that adjust the CSM	(37)	979	(942)	—
Contracts initially recognised in the period	379	(187)	(192)	—


	342	792	(1,134)	—


Finance income from reinsurance contracts held	(6,919)	—	(75)	(6,994)


Total amounts recognised in comprehensive income	(5,928)	1,147	(68)	(4,849)


Cash flows
Premium paid net of ceding commission and other directly attributable expenses paid	(7,339)	—	—	(7,339)
Recoveries from insurance	2,967	—	—	2,967


Total cash flows	(4,372)	—	—	(4,372)


Reinsurance contract liabilities at 31 December	25,404	(4,800)	(9,854)	10,750

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

213

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.4 Life risk - Reinsurance contracts held - continued

Impact of contracts recognised in the year


Group	2023	2022
	Contracts originated not in a net gain	Contracts originated in a net gain
	€’000	€’000

Estimates of the present value of future cash inflows	(2,860)	(2,661)
Estimates of the present value of future cash outflows	3,260	3,040
Risk adjustment for non-financial risk	(227)	(187)
CSM	(173)	(192)


Increase in reinsurance contract assets from contracts recognised in the period	—	—

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

214

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.5 Investment contracts with DPF

Reconciliation of the liability for remaining coverage and the liability for incurred

claims


Group	2023			2022
	LRC Excluding Loss Component	LIC	Total	LRC Excluding Loss Component	LIC	Total
	€’000	€’000	€’000	€’000	€’000	€’000

Insurance contract liabilities at 1 January	1,914,851	46,601	1,961,452	2,271,573	44,132	2,315,705


Insurance revenue	(34,668)	—	(34,668)	(35,187)	—	(35,187)


Insurance service expenses
Incurred claims and other directly attributable expenses	—	13,711	13,711	—	14,919	14,919
Insurance acquisition cash flows amortization	3,756	—	3,756	6,351	—	6,351


Insurance service expenses	3,756	13,711	17,467	6,351	14,919	21,270


Insurance service result	(30,912)	13,711	(17,201)	(28,836)	14,919	(13,917)

Finance expenses/(income) from insurance contracts issued	178,200	—	178,200	(268,747)	—	(268,747)


Total amounts recognised in comprehensive income	147,288	13,711	160,999	(297,583)	14,919	(282,664)


Investment components	(255,819)	255,819	—	(285,217)	285,217	—

Cash flows
Premium received	135,175	—	135,175	233,775	—	233,775
Claims and other directly attributable expenses	—	(267,212)	(267,212)	—	(297,667)	(297,667)
Insurance acquisition cash flows	(3,721)	—	(3,721)	(6,661)	—	(6,661)
increase in policy loans	(1,804)	—	(1,804)	(1,036)	—	(1,036)


Total cash flows	129,650	(267,212)	(137,562)	226,078	(297,667)	(71,589)


Insurance contract liabilities at 31 December	1,935,970	48,919	1,984,889	1,914,851	46,601	1,961,452

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

215

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.5 Investment contracts with DPF - continued

Reconciliation of the measurement components of contract balances


Group	2023
	Present value of future cash flows	Risk adjustment for non- financial risk	CSM	Total
	€’000	€’000	€’000	€’000

Insurance contract liabilities at 1 January	1,904,544	2,199	54,709	1,961,452


Changes that relate to current service
CSM recognised for the services provided	—	—	(6,178)	(6,178)
Change in the risk adjustment for non-financial risk for risk expired	—	(140)	—	(140)
Experience adjustment	(10,883)	—	—	(10,883)


	(10,883)	(140)	(6,178)	(17,201)


Changes that relate to future service
Changes in estimates that adjust the CSM	(18,202)	612	17,590	—
Contracts initially recognised in the period	(2,489)	144	2,345	—
Experience adjustments - arising from premiums received in the period that relate to future service	(3,261)	—	3,261	—


	(23,952)	756	23,196	—


Insurance service result	(34,835)	616	17,018	(17,201)


Finance income from insurance contracts issued	178,200	—	—	178,200


Total amounts recognised in comprehensive income	143,365	616	17,018	160,999


Cash flows
Premium received	135,175	—	—	135,175
Claims and other directly attributable expenses paid	(267,212)	—	—	(267,212)
Insurance acquisition cash flows	(3,721)	—	—	(3,721)
Increase in policy loans	(1,804)	—	—	(1,804)


Total cash flows	(137,562)	—	—	(137,562)


Insurance contract liabilities at 31 December	1,910,347	2,815	71,727	1,984,889

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

216

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.5 Investment contracts with DPF - continued

Reconciliation of the measurement components of contract balances - continued


Group	2022
	Present value of future cash flows	Risk adjustment for non- financial risk	CSM	Total
	€’000	€’000	€’000	€’000

Insurance contract liabilities at 1 January	2,244,713	3,688	67,304	2,315,705


Changes that relate to current service
CSM recognised for the services provided	—	—	(6,754)	(6,754)
Change in the risk adjustment for non-financial risk for risk expired	—	(259)	—	(259)
Experience adjustment	(6,904)	—	—	(6,904)


	(6,904)	(259)	(6,754)	(13,917)


Changes that relate to future service
Changes in estimates that adjust the CSM	14,213	(1,799)	(12,414)	—
Contracts initially recognised in the period	(5,656)	569	5,087	—
Experience adjustments - arising from premiums received in the period that relate to future service	(1,486)	—	1,486	—


	7,071	(1,230)	(5,841)	—


Insurance service result	167	(1,489)	(12,595)	(13,917)


Finance income from insurance contracts issued	(268,747)	—	—	(268,747)


Total amounts recognised in comprehensive income	(268,580)	(1,489)	(12,595)	(282,664)


Cash flows
Premium received	233,775	—	—	233,775
Claims and other directly attributable expenses paid	(297,667)	—	—	(297,667)
Insurance acquisition cash flows	(6,661)	—	—	(6,661)
Increase in policy loans	(1,036)	—	—	(1,036)


Total cash flows	(71,589)	—	—	(71,589)


Insurance contract liabilities at 31 December	1,904,544	2,199	54,709	1,961,452

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

217

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.5 Investment contracts with DPF - continued

Impact of contracts recognised in the year


Group	2023	2022
Direct participating contracts issued	Non-onerous contracts originated	Non-onerous contracts originated
	€’000	€’000

Estimates of present value of future cash outflows
- Insurance acquisition cash flows	4,001	6,379
- Claims and other directly attributable expense	144,823	247,931


	148,824	254,310
Estimates of the present value of future cash inflows	(151,313)	(259,966)
Risk adjustment for non-financial risk adjustment	144	569
CSM	2,345	5,087


Increase in insurance contract liabilities from contracts recognised in the period	—	—

24.6 Long term contracts - inputs, assumptions and estimation techniques

In applying IFRS 17 measurement requirements, the below inputs, assumptions and

estimation techniques were used.

(a)Estimation techniques

Best estimate of future cash flows

The best estimate liability is the present value of expected future cash flows, discounted

using a yield curve (i.e. interest rates at different maturities at a given point in time).

The estimates of these future cash flows are based on probability-weighted expected

future cash flows. The Group estimates which cash flows are expected and the

probability that they will occur as at the measurement date. The projections allow for all

expected decrements and policyholder actions, including lapses. Future premiums are

taken into account up to the contract boundary. Allowance for future expenses take into

account both overheads and directly attributable expenses, and future expense inflation.

The cash flow projections is performed on a policy by policy basis.

Investment contracts with DPF liabilities include the cost of financial guarantees and

options. A market consistent stochastic valuation is used to calculate these costs.

Representative model pointing is used in these stochastic runs. For such contracts,

discretionary benefits are allowed for separately in the investment contract liabilities.

The calculations reflect a pre-defined set of realistic management actions and

policyholder behaviour. The best estimate liability does not include the value of

shareholder transfers.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

218

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.6 Long term contracts - inputs, assumptions and estimation techniques - continued

(a)Estimation techniques - continued

Best estimate of future cash flows - continued

For unit-linked business, the unit and non-unit components are unbundled for the

purposes of determining the best estimate liability.

Risk adjustment for non-financial risk

The risk adjustment for non-financial risk is the compensation that is required for

bearing the uncertainty about the amount and timing of cash flows that arises from non-

financial risk as the insurance contract is fulfilled. Because the risk adjustment

represents compensation for uncertainty, estimates are made on the degree of

diversification benefits and expected favourable and unfavourable outcomes in a way

that reflects the Group’s degree of risk aversion. The Group estimates an adjustment for

non-financial risk separately from all other estimates. The Group considers separately

the effect of reinsurance in the risk adjustment for non-financial risk of the underlying

insurance contracts. The risk adjustment applied by the Group only includes mortality

risk, lapse risk, and expenses risk and catastrophic risk.

The risk adjustment was calculated at the issuing entity level and then allocated down to

each group of contracts in accordance with their risk profiles. The value at risk (‘VaR’)

method was used to derive the overall risk adjustment for non-financial risk, whereby

the maximum loss that a portfolio can experience within a one year time horizon at a

confidence level of 85 percent is determined. This technique discounts future cash flows

of the best estimate liabilities under different possible scenarios to produce a risk

distribution. The risk adjustment is taken to be equal to the VaR with that confidence

interval less the value of the best estimate of the discounted cash flows.

(b) Assumptions

All assumptions are best estimate, with no prudential margins. The Group takes into

account all relevant available data, both internal and external, when arriving at

assumptions that best reflect the characteristics of the underlying insurance portfolio.

In calculating estimates of fulfilment cash flows, the Group uses information about past

events, current conditions and forecasts of future conditions. The Group’s estimate of

future cash flows is the mean of a range of scenarios that reflect the full range of

possible outcomes. Each scenario specifies the amount, timing and probability of cash

flows.

Assumptions used to develop estimates about future cash flows are reassessed at each

reporting date and adjusted where required.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

219

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.6 Long term contracts - inputs, assumptions and estimation techniques - continued

(b)Assumptions - continued

Investment assets returns

For with-profits contracts, assumptions about future underlying investment returns are

made. Due to the measurement models applied and the nature of the products,

particularly the determination of the discount rates used to discount future estimates of

cash flows that vary with returns on underlying items, assumptions about future

underlying investment returns do not impact contract measurement significantly. There

are limited financial guarantees in these products. The liabilities associated with these

guarantees are measured using a market-consistent stochastic model. The interest rate

guarantee embedded in investment contracts with DPF was measured using stochastic

modelling, because the guarantee does not move symmetrically with different interest

rate scenarios. The guarantee was measured using a full range of scenarios representing

possible future risk-free interest rate environments published by European Insurance

and Occupational Pensions Authority (‘EIOPA’). Stochastic investment returns reflect

the volatility of the underlying assets.

For a sensitivity analysis, refer to Note 4.2(a).

Discount rates

The bottom-up approach was adopted by the Group in determining a suitable discount

rate. This approach was used to derive the discount rate for the cash flows that do not

vary based on the returns on underlying items in the investment contracts with DPF.

Under this approach, the discount rate is determined as the risk-free yield, adjusted for

differences in liquidity characteristics between the financial assets used to derive the

risk-free yield and the relevant liability cash flows (known as an ‘illiquidity premium’).

The risk-free rates used were as published by EIOPA and the Group evaluates the

illiquidity premium on a yearly basis.

Management uses judgement to assess liquidity characteristics of the liability cash

flows. The Group’s insurance contracts do not have a cash surrender value and hence,

its liabilities can be considered as illiquid which allows the Group to reflect the

illiquidity characteristics of these products via the illiquidity premium. The Group

decided to use a reference portfolio as an appropriate proxy for the term liabilities.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

220

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.6 Long term contracts - inputs, assumptions and estimation techniques - continued

(b)Assumptions - continued

Discount rates - continued

On the other hand, the Group’s investment contracts with DPF have surrender value and

therefore, liabilities can be considered highly liquid. Thus, these are discounted using

the risk-free rates without applying any illiquidity adjustment. Cash flows varying based

on underlying items are discounted using a discount rate that reflects the volatility of the

underlying assets.

For a sensitivity analysis, refer to Note 4.2(a).

The yield curves used to discount the estimates of future cash flows that do not vary

based on the returns of the underlying items are as follows:


	2023		2022
	No. of years		No. of years


Product	5	10	5	10


Life risk (issued and reinsurance held)	2.4%	2.5%	3.8%	3.8%


Investment contracts with DPF	2.3%	2.4%	3.1%	3.1%

Policy acquisition and maintenance expenses

The Group projects estimates of future expenses relating to fulfilment of contracts

within the scope of IFRS 17 using current expense levels adjusted for inflation, non-

recurring expenses and new budgeted expenses that the Group is expected to incur in

the future. Expenses comprise expenses directly attributable to the groups of contracts,

including an allocation of fixed and variable overheads.

The short-term expense inflation assumption is based on forecasts issued by the Central

Bank of Malta, adjusted for the Group’s own experience. The long-term expense

inflation assumption is based on the Central Bank of Malta long-term inflation target.

Expense inflation is considered to be a non-financial risk.

Where estimates of indirect expenses-related cash flows are determined at the portfolio

level or higher, they are allocated to groups of contracts on a systematic basis, such as

number of policies in force. A renewal per policy maintenance expense including

claims is derived for all portfolios.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

221

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.6 Long term contracts - inputs, assumptions and estimation techniques - continued

(b)Assumptions - continued

Policy acquisition and maintenance expenses - continued


	2023	2022

Life Risk	41.7	40.7
Investment contracts with DPF	50.7 - 86.6	42.2 - 75.4

Acquisition cash flows are typically allocated to the groups of contracts from which

they arise or to which they relate. This includes an allocation of acquisition cash flows

among existing new business. An acquisition expense per new business policy is

derived for all portfolios.

The Group provides investment-return services for the investment contracts with DPF

to manage assets in policyholder accounts and investment-related services for the

contracts measured under the VFA. An investment expense per asset under management

is derived.

For a sensitivity analysis, refer to Note 4.1.

Mortality rates

Mortality experience is reviewed annually and assumptions are set separately for term

and investment contracts with DPF having regard to past experience, events not in data

and future expected mortality trends. The Group makes reference to the following

standard mortality table. This UK mortality table is based on male assured lives of

combined smoker status


	2023	2022

Life Risk	44% AMC00	52% AMC00
Investment contracts with DPF	50% AMC00	54% AMC00

The Group fits its own experience as a percentage of the AMC00 mortality table and

uses this as a basis for its mortality assumption.

For a sensitivity analysis, refer to Note 4.1.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

222

24.Insurance contract assets, insurance contract liabilities, reinsurance contract

assets and reinsurance contract liabilities - continued

24.6 Long term contracts - inputs, assumptions and estimation techniques - continued

(b)Assumptions - continued

Lapse rates

The Group derives assumptions about lapse and surrender rates based on the Group's

own experience. Historical lapse and surrender rates are derived from the Group’s

policy administration data. An analysis is then performed of the Group’s historical rates

in comparison to the assumptions previously used. Statistical methods are used to derive

adjustments to reflect the Group’s own experience and any trends in the data, to arrive

at the probability-weighted expected lapse and surrender rates. Analysis is performed

and assumptions are set by major product lines.

For investment contracts with DPF, the Group incorporates dynamic lapsing. For these

products lapse experience also vary by market conditions and outlook.

The following assumptions about lapse and surrender rates were used. Methods used to

derive these assumptions have not changed in 2023.


	2023	2022

Life Risk	3.0% - 7.0%	3.0% - 7.0%
Investment contracts with DPF	0.5% - 7.0%	0.5% - 7.0%

For a sensitivity analysis, refer to note 4.1.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

223

25.Investment contract liabilities

The table shows a reconciliation of the opening to closing balance for the investment

contract liabilities.


	Group
	2023	2022
	€’000	€’000

Opening balance – 1 January	69,054	75,922
Contributions received	50,266	6,594
Benefits paid	(3,582)	(3,173)
Investment return from underlying assets	8,194	(10,353)
Asset management fees charged	(679)	64

Closing balance – 31 December	123,253	69,054

In the above reconciliation, the investment return from the underlying assets represents

changes in the fair value of the investment contract liabilities due to changes in market

conditions. Asset management services revenue of €1.2m (2022: €0.2m) in the profit or

loss also includes the asset management fees charged and income trailer fees.

The above liabilities are substantially non-current in nature.

26. Trade and other receivables


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Receivables from intermediaries	19,410	16,715	19,410	16,715

Other prepayments and receivables:
- prepayments and other receivables	5,635	5,441	1,544	1,663
- accrued interest and rent	758	8,003	179	377
- receivables from group undertakings	48	—	532	420
- receivables from associated undertaking	59	183	59	183
- other debtors	115	66	—	—

Provision for impairment of receivables	(535)	(440)	(535)	(440)


	25,490	29,968	21,189	18,918


Current portion	25,490	29,968	21,189	18,918

Balances due from group undertakings, associated undertaking and other receivables

are unsecured and non-interest bearing.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

224

26.Trade and other receivables - continued

Movements in the provision for impairment of receivables are as follows:


	Group and Company
	2023	2022
	€’000	€’000

Balance as at 1 January	440	387
Adjustment on initial application of IFRS 9 for impairment losses	54	—
Movement in expected credit loss	—	41
Increase in provision for impairment	41	147
Release of provision for impairment during the year	—	(135)


Balance as at 31 December	535	440

27.Cash and cash equivalents

For the purpose of the statement of cash flows, the year-end cash and cash equivalents

comprise the following:


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Cash at bank and in hand	45,975	137,286	8,780	11,130
T-Bills	2,000	—	2,000	—


	47,975	137,286	10,780	11,130

As at 31 December 2023 an amount of €2.76 million ( 2022: €2.16 million) within

deposits with banks or credit institutions, was held in a margin account as collateral

against exchange traded futures.

28.Share capital


	Group and Company
	2023	2022
	€’000	€’000

Authorised
150 million ordinary shares of €0.21 each	31,500	31,500


Issued and fully paid
92 million ordinary shares of €0.21 each	19,320	19,320

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

225

29. Other reserves

Group


	Freehold land and buildings	Available- for-sale investments	Total
	€'000	€'000	€'000

Balance at 1 January 2022	1,081	183	1,264
Fair value movements -gross	—	(831)	(831)
Fair value movements -tax	—	61	61
Revaluation gain on freehold land and buildings	(225)	—	(225)


Balance at 31 December 2022	856	(587)	269



Balance at 1 January 2023	856	(587)	269
Initial Application of IFRS9	—	81	81
Fair value movements -gross	—	284	284
Fair value movements -tax	—	(11)	(11)
FVOCI investment reclassified to profit or loss	—	14	14


Balance at 31 December 2023	856	(219)	637

The above reserves are not distributable reserves.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

226

29.Other reserves - continued

Company


	Investment in subsidiary undertakings	Investment in associated undertakings	Available for-sale investments	Total
	€’000	€’000	€’000	€’000

Balance at 1 January 2022	34,663	89	183	34,935
Fair value movements -gross	—	—	(831)	(831)
Fair value movements -tax	—	—	61	61
Other	—	6	—	6


Balance at 31 December 2022	34,663	95	(587)	34,171



Balance at 1 January 2023	34,663	95	(587)	34,171
Net effect of initial application of IFRS 9	—	—	81	81
Fair value movements -gross	—	—	284	284
Fair value movements -tax	—	—	(11)	(11)
FVOCI investment reclassified to profit or loss	—	—	14	14
Other	—	14	—	14


Balance at 31 December 2023	34,663	109	(219)	34,553

The above reserves are not distributable reserves.

30. Provision for other liabilities and charges

The Group and Company operate a defined benefit plan in favour of a former Executive

Chairman. The pension plan defines an amount of pension benefit that he receives on

retirement. The liability recognised in the statement of financial position is the present

value of the obligation determined by discounting estimated future cash outflows.

The following table shows the changes in the present value of the pension obligation

and amounts shown in the profit or loss and other comprehensive income:

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

227

30. Provision for other liabilities and charges - continued


	Group and Company
	2023	2022
	€’000	€’000

At 1 January	854	997
Interest expense - profit or loss	32	7
Settlements	(67)	(62)
Re-measurement actuarial loss - other comprehensive income	104	(88)


At 31 December	923	854

The following payments as expected in the future years:


	Group and Company
	2023	2022
	€’000	€’000

Within one year	66	65
After more than one year	857	789


	923	854

The significant assumptions used in determining the pension obligation are shown

below:



	Group and Company
	2023	2022

Mortality	AMC00	AMC00
Discount rate	3.1%	3.8%
Inflation rate	2.4%	2.1%

A quantitative analysis of the impact on the pension obligation for the significant

assumptions is shown below:


	Group and Company
	2023	2022
	€000	€000

Discount Rate - 1% point increase	(69)	(64)
Discount Rate - 1% point decrease	79	72
Inflation Rate - 1% point increase	73	68
Inflation Rate - 1% point decrease	(66)	(61)

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

228

31.Other payables


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Creditors arising out of insurance operations	260	255	260	255
Amount owed to associated undertakings	242	264	242	257
Amount owed to group undertakings	—	—	999	1,012
Social security and other tax payables	5,293	4,295	1,765	1,711
Accruals and other payables	11,760	9,175	6,008	3,964
Deferred income	1,366	799	40	89
Other creditors	428	2,915	—	—


	19,349	17,703	9,314	7,288


Current	19,094	17,488	9,314	7,288
Non-current	255	215	—	—


	19,349	17,703	9,314	7,288

Balances due to group undertakings are unsecured and non-interest bearing.

Deferred income for the Group includes front-end fees received from holders of

investment contracts without DPF as a prepayment for asset management and related

services and rental income received in advance. These amounts are non-refundable and

are released to income as the services are rendered.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

229

32.Cash generated from operations

Reconciliation of profit before tax to cash (used in)/ generated from operations:


	Group		Company
	2023	2022	2023	2022
		Restated		Restated
	€’000	€’000	€’000	€’000

Profit before tax	24,019	8,292	9,864	6,596
Adjustments for:
Depreciation (Note 18)	1,079	1,071	616	579
Adjustment on initial application of IFRS 9 for impairment losses	(55)	—	(55)	—
Increase in provision for impairment of receivables (Note 26)	41	53	41	53
Settlement of provision for liabilities and charges (Note 30)	(67)	(62)	(67)	(62)
Amortisation (Note 16)	4,549	2,575	2,147	1,973
Depreciation of right-of-use assets	334	337	306	307
Lease payments against lease liabilities	(398)	(386)	(359)	(347)
Loss on disposal of intangible asset	—	2	—	—
Investment return adjustments	(185,695)	283,604	(1,160)	(342)
Movements in:
Trade and other receivables	(2,410)	(1,538)	(2,303)	(644)
Insurance and reinsurance contracts	27,497	(352,064)	(267)	3,264
Investment contract liabilities	54,199	(6,868)	—	—
Other payables	1,764	(476)	2,016	(115)


Cash (used in)/generated from operations	(75,143)	(65,460)	10,779	11,262

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

230

33.Commitments

Capital commitments

Commitments for capital expenditure not provided for in these financial statements are

as follows:


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Authorised and not contracted for
- property, plant and equipment	629	1,354	—	707
- intangible assets	4,485	3,517	528	1,326
- investment property	853	—	—	—


	5,967	4,871	528	2,033


Authorised and contracted for
- property, plant and equipment	182	132	140	110
- intangible assets	3,273	1,984	2,340	1,386
- investment property	1,219	1,427	50	—
- other investments	35,835	47,937	—	—


	40,509	51,480	2,530	1,496

Operating lease commitments – where a Group company is a lessor

The Group and the Company lease out certain premises under operating leases. The

future minimum lease payments receivable under non-cancellable operating leases are

as follows:


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Not later than 1 year	5,815	5,530	660	654
Later than 1 year and not later than 5 years	8,531	10,333	869	1,136
Later than 5 years	3,113	3,726	—	—


	17,459	19,589	1,529	1,790

Rental income from operating leases recognised in profit or loss during the year is

disclosed in Note 8.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

231

34.Contingencies

The Group and Company have given guarantees to third parties amounting to €4,600

(2022: €0.14 million) not arising under contracts of insurance.

35.Related party transactions

In the normal course of business, the Group enters into various transactions with related

parties. Related parties are defined as those that have an ability to control or exercise

significant influence over the other party in making financial and operational decisions.

These include directors, key management personnel and shareholders, and their close

family members, who hold a substantial amount of the votes able to cast at general

meetings. Parent undertaking refers to MAPFRE S.A. and/or companies owned by

MAPFRE S.A.. Bank of Valletta p.l.c. is a related undertaking in light of its

shareholding in the Company and in MAPFRE MSV Life p.l.c.. Subsidiary

undertakings and associated undertakings refer to the companies listed in Notes 20 and

21 respectively.

Relevant particulars of related party transactions are as follows:

Group


	2023	2022
	€’000	€’000

Sales of insurance contracts and other services

Transactions with a parent undertaking:
Commission received	5,328	4,849
Claims recoverable	12,377	7,560


Transactions with related undertaking:
Trailer fees receivable	1	4
Sale of insurance contracts	1,086	1,039
Dividends received and interest income	637	1,221
Rental income on investment property	248	230


Transactions with associated undertaking:
Sale of insurance contracts	20	25
Dividends received	147	137
Rental income on investment property	44	43
Reimbursement of expenses for back office support services	19	19

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

232

35.Related party transactions - continued

Group - continued


	2023	2022
	€’000	€’000

Purchase of products and services

Transactions with a parent undertaking:
Reinsurance premium ceded	17,997	15,325
Staff development training & Fringe Benefits	4	5
Expat staff benefits and services	105	127
Computer maintenance, Group IT shared services	1,920	1,558
Capitalisation of software development	9	28
Other back office support services	647	802
Investment management services	20	16
Commission payable	82	120


Transactions with other related undertaking:
Acquisition costs payable	2,638	4,304
Bank charges	207	207
Bank interest payable	—	197
Investment management services	49	64
Claims paid	148	335


Transactions with associates undertaking:
Road side assistance and other back office support services	2,856	2,750
Claims paid	4	11

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

233

35.Related party transactions - continued

Company


	2023	2022
	€’000	€’000

Sales of insurance contracts and other services

Transactions with a parent undertaking:
Commission received	5,328	4,849
Claims recoverable	11,075	6,918


Transactions with related undertaking:
Sale of insurance contracts	1,086	1,039
Dividends received and interest income	26	15
Trailer fees receivable	1	1


Transactions with subsidiary undertaking:
Sale of insurance contracts	190	294
Dividends received	—	1,176
Rental income on investment property	52	52
Rental income from sub-letting of shared premises	32	37
Reimbursement of expenses for back office support services	1,013	798


Transactions with associated undertaking:
Sale of insurance contracts	20	25
Dividends received	147	137
Rental income on investment property	44	43
Reimbursement of expenses for back office support services	19	19

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

234

35.Related party transactions - continued

Company - continued


	2023	2022
	€’000	€’000

Purchase of products and services

Transactions with a parent undertaking:
Reinsurance premium ceded	15,860	14,992
Staff development training & fringe benefits	4	5
Expat staff benefits and services	105	127
Computer maintenance, Group IT shared services	824	564
Capitalisation of software development	9	28
Other back office support services	458	453
Investment management services	20	16


Transactions with other related parties:
Bank charges	111	119
Bank interest payable	—	20
Claims paid	148	335


Transactions with subsidiaries
Reimbursement of expenses for back office support services	2,490	1,886
Claims paid	135	165
Employer's contribution to defined contribution work pension scheme	76	60


Transactions with associates
Road side assistance and other back office support services	2,856	2,750
Claims paid	4	11

Key management personnel during 2023 and 2022 comprised the President & Chief

Executive Officer, Chief Executive Officers, Assistant General Managers, General

Manager, Chief Financial Officer, Chief Officers and Chief Underwriters. Total

remuneration paid by the Group to key management personnel amounted to €3.63

million (Company: €1.78 million). Corresponding figures for 2022 were €3.43 million

paid by the Group and €1.70 million paid by the Company.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

235

35.Related party transactions - continued

Year-end balances arising from the above transactions:


	Group		Company
	2023	2022	2023	2022
	€’000	€’000	€’000	€’000

Financial assets at amortised cost
-Related undertaking	244	156	244	156
-Parent undertaking	128	148	128	148

Financial liabilities at amortised cost
-Parent undertaking	738	1,263	337	894
-Related undertaking	160	171	—	—

Amounts owed to
-Associated undertaking	245	257	245	257
-Subsidiary undertaking	—	—	1,011	1,029

Amounts owed by
-Associated undertaking	59	183	59	183
-Subsidiary undertaking	—	—	545	500
-Parent undertaking	—	191	—	1

Accruals - Parent undertaking	378	277	268	163

Reinsurance contract assets
-Parent undertaking	17,867	27,299	17,183	27,105
-Related undertaking	476	55	476	55
-Subsidiary undertaking	—	—	—	156
-Associated undertaking	10	6	10	6

Investment in related undertakings	14,088	59,128	800	456
Cash and cash equivalents with related undertakings	31,085	111,723	4,828	5,513

All balances above have arisen in the course of the Group’s and Company’s normal

operations. Balances due from/to group undertakings are unsecured and non-interest

bearing.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

236

36. Statutory information

MAPFRE Middlesea p.l.c. is a public limited company and is incorporated in Malta.

The Group is 55.83% owned by MAPFRE Internacional S.A. (the “immediate parent”),

a company registered in Spain, the registered office of which is situated at Carretera de

Pozuelo 52, Majadahonda 28222, Madrid, Spain.

The Group’s ultimate parent is Fundación MAPFRE, the registered office of which is

situated at Paseo de Recoletos 23, 28004, Madrid, Spain.

The Group’s results are consolidated at MAPFRE S.A. level of which Fundación

MAPFRE is the parent and MAPFRE Internacional S.A. is the subsidiary. MAPFRE

S.A. is a company the registered office of which is situated at Carretera de Pozuelo 52,

Majadahonda 28222, Madrid, Spain.

MAPFRE MIDDLESEA p.l.c.

Annual Report - 31 December 2023

237

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report

To the Shareholders of MAPFRE Middlesea p.l.c.

1 Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of MAPFRE Middlesea p.l.c. (the “Company”) and of the

Group of which the Company is the parent, which comprise the statements of financial position as at

31 December 2023, the statements of profit or loss and other comprehensive income, changes in

equity and cash flows for the year then ended, and notes, comprising material accounting policies and

other explanatory information.

In our opinion, the accompanying financial statements:

a. give a true and fair view of the financial position of the Company and of the Group as at 31

December 2023, and of their financial performance and their cash flows for the year then

ended in accordance with International Financial Reporting Standards (“IFRS”) as adopted by

the EU; and

b. have been properly prepared in accordance with the provisions of the Companies Act, 1995

(Chapter 386, Laws of Malta) (the “Act”) and the Insurance Business Act, 1998 (Chapter 403,

Laws of Malta) (the “Insurance Business Act”) and, additionally, specifically in relation to those

of the Group, with the requirements of Article 4 of Regulation (EC) 1606/2002 on the

application of international accounting standards (the “Regulation”).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our

responsibilities under those standards are further described in the Auditors’ responsibilities for the

audit of the financial statements section of our report. We are independent of the Company and the

Group in accordance with the International Ethics Standards Board for Accountants’ International

Code of Ethics for Professional Accountants (including International Independence Standards)

(“IESBA Code”), together with the ethical requirements that are relevant to our audit of the financial

statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders)

Directive issued in terms of the Accountancy Profession Act (Chapter 281, Laws of Malta) (“APA”),

and we have fulfilled our other ethical responsibilities in accordance with these requirements and the

IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our opinion.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in

our audit of the financial statements of the current year (as communicated to the audit committee),

and include a description of the most significant assessed risks of material misstatement (whether or

not due to fraud) identified by us, including those which had the greatest effect on: the overall audit

strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and

in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We summarise below the key audit matters, together with our response by way of the audit

procedures we performed to address those matters in our audit, and key observations arising with

respect to such risks of material misstatement.

Estimates of the liability for incurred claims (“LIC”) with respect to short-term contracts

Accounting policy note 2.10 to the financial statements and notes 3 and 24 for further disclosures

LIC for short-term contracts (€40,446 thousand) within ‘Insurance Contract Liabilities’

The Liability for incurred claims is measured as the total of the expected fulfilment cash flows relating

to insurance events that occurred by the financial reporting date, which comprise estimates of future

cash flows, adjusted to reflect the time value of money and a risk adjustment for non-financial risks.

We have considered the estimate of future cash flows as a key audit matter in view of the subjectivity

surrounding the determination of the estimate, that is based on claims data and an actuarial

methodology which involves significant assumptions.

Due to the degree of such inherent estimation uncertainty underlying the estimate of future cash

flows, the amounts recognised in the statement of financial position may be different to those

eventually settled. Those differences may be material.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Key audit matters (continued)

Estimates of the liability for incurred claims (“LIC”) with respect to short-term contracts

(continued)

Our response

As part of our procedures, with the assistance of our actuarial specialist, we evaluated the

appropriateness of the Company’s assumptions applied in estimating the future cash flows and the

resulting estimate, for substantially all the liability for incurred claims. The estimate includes

assumptions related to the amount of the expected settlement and claims development patterns. We

considered industry norms, as well as our industry knowledge and experience, in performing our

substantive procedures. In relation to claims data used in the estimate, we evaluated a sample to

assess its relevance and reliability based on the information available to the Company at the financial

reporting date.

Key observation

We have no key observations to report, specific to this matter.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Key audit matters (continued)

Measurement of assets and liabilities for remaining coverage (“ARC” and “LRC”) for

insurance contracts and reinsurance contracts held in relation to long-term contracts carried

out by the main subsidiary of the Group, MAPFRE MSV Life p.l.c. (MMSV)

Accounting policy note 2.10 to the financial statements and notes 3 and 24 for further disclosures

ARC and LRC for long-term contracts within the 'Insurance contract assets' (€8,945 thousand),

'Insurance contract liabilities’ (€1,991,377 thousand) and 'Reinsurer’s contract liabilities’ (€15,493

thousand)

MMSV enters into insurance contracts which comprise term and unit-linked contracts with significant

insurance risk and investment contracts with discretionary participation features (“DPF”). MMSV also

holds reinsurance contracts to cover its term business.

MMSV applies the general measurement model on its insurance contracts and reinsurance contracts

held, and the variable fee approach on investment contracts with DPF.

ARC and LRC are measured as the total of (i) the expected fulfilment cash flows (“FCF”), which

comprise estimates of future cash flows within the contract boundary, adjusted to reflect the time

value of money and the associated financial risks, and a risk adjustment for non-financial risks; and

(ii) the contractual service margin (“CSM”), which represents the unearned profit that MMSV will

recognise as it provides insurance contract services in the future. The measurement of ARC and LRC

involves use of current and historic data, actuarial methods and models, and significant assumptions

for the estimation of future cash flows.

We have considered the measurement of ARC and LRC as a key audit matter in view of the nature

and subjectivity of the estimate, and its overall inherent estimation uncertainty. The subjectivity

involved relates mainly to the judgement involved in the selection of actuarial assumptions. Due to the

degree of such inherent estimation uncertainty, the ultimate total settlement value may be different

from the amounts provided, and the amount of CSM may be different from the amounts recognised as

profit in the future. Those differences may be material.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Key audit matters (continued)

Measurement of assets and liabilities for remaining coverage (“ARC” and “LRC”) for

insurance contracts and reinsurance contracts held in relation to long-term contracts carried

out by the main subsidiary of the Group, MAPFRE MSV Life p.l.c. (MMSV) (continued)

Our response

As part of our procedures, we evaluated the ARC and LRC by performing audit procedures which

included:

• the involvement of our actuarial specialist to assist us in:

◦ assessing and challenging the significant assumptions selected by applying our

experience, industry knowledge, and reference to the related accounting standards; and

◦ evaluating MMSV’s estimate of ARC and LRC by assessing the overall liability

movements based on the assumptions and data applied;

• testing of the underlying data elements by reference to MMSV’s actual cash flows and policy

data; and

• considering the adequacy of the related disclosures to the financial statements.

Key observation

We have no key observations to report, specific to this matter.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92 Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Other information

The directors are responsible for the other information. The other information comprises of:

• the ‘Chairman’s Statement’;

• the ‘President & Chief Executive Officer’s Statement’;

• the ‘Directors’ Report’;

• the ‘Corporate Governance Statement; and

• the ‘Remuneration Statement and Report of the Remuneration Committee to the Shareholders’,

but does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and, other than in the

case of the directors’ report on which we report separately below in our ‘Opinion on the Directors’

Report’, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other

information, and, in doing so, consider whether the other information is materially inconsistent with the

financial statements or our knowledge obtained in the audit, or otherwise appears to be materially

misstated. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact. We have nothing to report

in this regard.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Responsibilities of the directors for the financial statements

The directors are responsible for the preparation of financial statements that (a) give a true and fair

view in accordance with IFRS as adopted by the EU, and (b) are properly prepared in accordance

with the provisions of the Act, and the Insurance Business Act, and, additionally, specifically in relation

to those of the Group, with the requirements of Article 4 of the Regulation. The directors are also

responsible for such internal control as they determine is necessary to enable the preparation of

financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s and

the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless the directors either intend to liquidate

the Company and/or the Group or to cease operations, or have no realistic alternative but to do so.

The directors are also responsible for overseeing the financial reporting process.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report

that includes our opinion. ‘Reasonable assurance’ is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with ISAs will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are considered material if, individually or in

the aggregate, they could reasonably be expected to influence the economic decisions of users taken

on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain

professional scepticism throughout the audit.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

Portico Building

Marina Street

Pietà

PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Auditors’ responsibilities for the audit of the financial statements (continued)

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from error,

as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override

of internal control.

• Consider the extent of compliance with those laws and regulations that directly affect the financial

statements, as part of our procedures on the related financial statement items. For the remaining

laws and regulations, we make enquiries of directors and other management, and inspect

correspondence with the regulatory authority, as well as legal correspondence. As with fraud,

there remains a higher risk of non-detection of other irregularities (whether or not these relate to

an area of law directly related to the financial statements), as these may likewise involve

collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

• Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Company’s and the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Company's and the Group’s ability to

continue as a going concern. If we conclude that a material uncertainty exists, we are required to

draw attention in our auditors’ report to the related disclosures in the financial statements or, if

such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditors’ report. However, future events or conditions

may cause the Company and/or the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the

disclosures, and whether the financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

Portico Building

Marina Street

Pietà

PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Auditors’ responsibilities for the audit of the financial statements (continued)

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and performance of the Group

audit. We remain solely responsible for our audit opinion.

We communicate with the audit committee regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in internal

control that we identify during our audit.

We also provide the audit committee with a statement that we have complied with relevant ethical

requirements regarding independence, and communicate with them all relationships and other

matters that may reasonably be thought to bear on our independence, and where applicable, actions

taken to eliminate threats or safeguards applied.

From the matters communicated with the audit committee, we determine those matters that were of

most significance in the audit of the financial statements of the current period and are therefore the

key audit matters. We describe these matters in our auditors’ report unless law or regulation

precludes public disclosure about the matter or when, in extremely rare circumstances, we determine

that a matter should not be communicated in our report because the adverse consequences of doing

so would reasonably be expected to outweigh the public interest benefits of such communication.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

2 Opinion on the Directors’ Report

The directors are responsible for preparing a directors’ report in accordance with the provisions of

article 177 of the Act and other applicable legal requirements, and is to include a statement that the

Company is a going concern with supporting assumptions or qualifications as necessary, as required

by Rule 5.62 of the Capital Markets Rules issued by the Malta Financial Services Authority (the

“Capital Market Rules”).

We are required to consider whether the information given in the directors’ report for the accounting

period for which the financial statements are prepared is consistent with those financial statements;

and, if we are of the opinion that it is not, we shall state that fact in our report. We have nothing to

report in this regard.

Pursuant to article 179(3) of the Act, we are also required to:

• express an opinion on whether the directors’ report has been prepared in accordance with the

applicable legal requirements; and

• state whether, in the light of the knowledge and understanding of the entity and its environment

obtained in the course of our audit of the financial statements, we have identified material

misstatements in the directors’ report, giving an indication of the nature of any such

misstatements.

Pursuant to Rule 5.62 of the Capital Markets Rules, we are required to review the directors’ statement

in relation to going concern.

In such regards:

• in our opinion, the Directors’ Report has been prepared in accordance with the applicable legal

requirements;

• we have not identified material misstatements in the Directors’ Report; and

• we have nothing to report in relation to the statement on going concern.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

3 Report on Other Legal and Regulatory Requirements

Matters on which we are required to report by the Act, specific to public interest entities

Pursuant to article 179B(1) of the Act, we report as under matters not already reported upon in our

‘Report on the Audit of the Financial Statements’:

• we were first appointed as auditors by the shareholders on 15 July 2015, and subsequently

reappointed at the Company’s general meetings for each financial year thereafter. The period of

total uninterrupted engagement is nine years;

• our opinion on our audit of the financial statements is consistent with the additional report to the

audit committee required to be issued by the Audit Regulation (as referred to in the Act); and

• we have not provided any of the prohibited services as set out in the APA.

Matters on which we are required to report by exception by the Act

Pursuant to articles 179(10) and 179(11) of the Act, we have nothing to report to you with respect to

the following matters:

• proper accounting records have not been kept; or

• the financial statements are not in agreement with the accounting records; or

• we have not obtained all the information and explanations which, to the best of our knowledge

and belief, we require for the purpose of our audit.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Report on compliance of the Annual Report with the requirements of the Commission

Delegated Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “European

Single Electronic Format Regulatory Technical Standard” or “ESEF Regulation”), by reference

to Capital Markets Rule 5.55.6 issued by the Malta Financial Services Authority

We have undertaken a reasonable assurance engagement in accordance with the requirements of

Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act, 1979

(Chapter 281, Laws of Malta), the Accountancy Profession (European Single Electronic Format)

Assurance Directive, on the Annual Report for the year ended 31 December 2023, prepared in a

single electronic reporting format.

Responsibilities of the directors for compliance with the requirements of the ESEF Regulation

As required by Capital Markets Rule 5.56A, the directors are responsible for the preparation of the

Annual Report in XHTML format, including the relevant mark-ups, in accordance with the

requirements of the ESEF Regulation.

In addition, the directors are responsible for such internal control as they determine is necessary to

enable the preparation of the Annual Report that is in compliance with the requirements of the ESEF

Regulation.

Auditors’ responsibilities to report on compliance with the requirements of the ESEF Regulation

Our responsibility is to obtain reasonable assurance about whether the Annual Report in XHTML

format, including the relevant mark-ups, comply in all material respects with the ESEF Regulation

based on the evidence we have obtained. As part of our work, we obtain an understanding of the

Company’s controls relevant to the preparation of the Annual Report in compliance with the said

requirements, but not for the purpose of expressing an opinion on the effectiveness of the controls in

place.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Auditors’ Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Report on compliance of the Annual Report with the requirements of the Commission

Delegated Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “European

Single Electronic Format Regulatory Technical Standard” or “ESEF Regulation”), by reference

to Capital Markets Rule 5.55.6 issued by the Malta Financial Services Authority (continued)

Auditors’ responsibilities to report on compliance with the requirements of the ESEF Regulation

(continued)

In discharging that responsibility, we:

• obtain an understanding of the entity's financial reporting process, including the preparation of the

Annual Report, in accordance with the requirements of the ESEF Regulation;

• perform validations to determine whether the Annual Report has been prepared in accordance

with the requirements of the technical specifications of the ESEF Regulation; and

• examine the information in the Annual Report to determine whether all the required mark-ups

therein have been applied and whether, in all material respects, they are in accordance with the

requirements of the ESEF Regulation.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

conclusion.

Conclusion

In our opinion, the Annual Report for the year ended 31 December 2023 has been prepared, in all

material respects, in accordance with the requirements of the ESEF Regulation, by reference to

Capital Markets Rule 5.55.6.

The Principal authorised to sign on behalf of KPMG on the audit resulting in this independent auditors’

report is Claude Ellul.

KPMG 25 March 2024

Registered Auditors

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Assurance Report

To the Shareholders of MAPFRE Middlesea p.l.c.

Report required by Capital Markets Rules 5.98 and 12.26N issued by the Malta Financial

Services Authority (the “MFSA”)

We were engaged by the Directors of MAPFRE Middlesea p.l.c.(the “Company”) to report on the

disclosures of specific elements in the Corporate Governance Statement and the Remuneration

Report (the “Disclosures”) as at 31 December 2023, in the form of an independent reasonable

assurance conclusion, as to whether they are, in all material respects, in compliance with the

corporate governance regulations and information to be provided in the Remuneration Report set out

in the Capital Markets Rules issued by the MFSA (the “Capital Market Rules”). More specifically, we

are required to report on the Disclosures in the form of an independent reasonable assurance

conclusion about whether:

a. in light of our knowledge and understanding of the Company and its environment obtained in the

course of the statutory audit, we have identified material misstatements with respect to the

information referred to in Capital Markets Rules 5.97.4 (dealing with the Company’s internal

control and risk management systems in relation to the financial reporting process) and 5.97.5

(where a takeover bid applies). Where material misstatements are identified in relation to those

requirements, we shall, in addition to our conclusion, provide an indication of the nature of such

misstatements;

b. the Disclosures include the other information required by Capital Markets Rule 5.97, insofar as it

is applicable to the Company; and

c. the Disclosures include the information required by Appendix 12.1, ‘Information to be provided in

the Remuneration Report’, to Chapter 12 of the Capital Markets Rules (as applicable).

Responsibilities of the Directors

The Directors are responsible for preparing and presenting the Disclosures that are free from material

misstatement in accordance with the requirements of the Capital Market Rules and for the information

contained therein.

This responsibility includes designing, implementing and maintaining internal control as they

determine is necessary to enable the preparation and presentation of the Disclosures that are free

from misstatement, whether due to fraud or error.

The Directors are also responsible for preventing and detecting fraud and for identifying and ensuring

that the Company complies with laws and regulations applicable to its activities. The Directors are

responsible for ensuring that personnel involved in the preparation and presentation of the

Disclosures are properly trained, systems are properly updated and that any changes in reporting

relevant to the Disclosures encompass all significant business units.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Assurance Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Our Responsibilities

Our responsibility is to examine the Disclosures prepared by the Company and to report thereon in

the form of an independent reasonable assurance conclusion based on the evidence obtained. We

conducted our engagement in accordance with International Standard on Assurance Engagements

3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial

Information (“ISAE 3000”) issued by the International Auditing and Assurance Standards Board. That

standard requires that we plan and perform our procedures to obtain reasonable assurance about

whether the Disclosures are properly prepared and presented, in all material respects, in accordance

with the requirements set out in the relevant Capital Markets Rules.

The firm applies International Standard on Quality Management 1, which requires the firm to design,

implement and operate a system of quality management including policies or procedures regarding

compliance with ethical requirements, professional standards and applicable legal and regulatory

requirements.

We have complied with the independence and other ethical requirements of the International Ethics

Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including

International Independence Standards) (IESBA Code), together with the ethical requirements that are

relevant to our assurance engagement in accordance with the Accountancy Profession (Code of

Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Chapter 281,

Laws of Malta), and we have fulfilled our other ethical responsibilities in accordance with these

requirements and the IESBA Code. The IESBA Code is founded on fundamental principles of integrity,

objectivity, professional competence and due care, confidentiality and professional behavior.

The procedures selected and our determination of the nature, timing and extent of those procedures,

will depend on our judgment, including the assessment of the risks of material misstatement of the

preparation and presentation of the Disclosures whether due to fraud or error.

In making those risk assessments, we have considered internal control relevant to the preparation

and presentation of the Disclosures in order to design assurance procedures that are appropriate in

the circumstances, but not for the purposes of expressing a conclusion as to the effectiveness of the

Company’s internal control over the preparation and presentation of the Disclosures. Reasonable

assurance is less than absolute assurance.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Assurance Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Our Responsibilities (continued)

We are not required to, and we do not, consider whether the Directors’ statements on internal control

and risk management systems cover all the risks and controls in relation to the financial reporting

process or form an opinion on the effectiveness of the Company’s corporate governance procedures

or its risks and control procedures, nor on the ability of the Company to continue in operational

existence. Our opinion in relation to the disclosures pursuant to Capital Markets Rules 5.97.4 and

5.97.5 (as appropriate) is based solely on our knowledge and understanding of the Company and its

environment obtained in forming our opinion on the audit of the financial statements.

As part of this engagement, we have not performed any procedures by way of audit, review or

verification of the Disclosures nor of the underlying records or other sources from which the

Disclosures were extracted.

Other Information

We also read the other information included in the Annual Report that contains the Disclosures, and

our report thereon, in order to identify material inconsistencies, if any, with the Disclosures. We have

nothing to report in this regard.

Conclusion

Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

conclusion.

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.

KPMG

92, Marina Street

Pietà, PTA 9044

Malta

Telephone(+356) 2563 1000

Fax (+356) 2566 1000

Websitewww.kpmg.com.mt

Independent Assurance Report (continued)

To the Shareholders of MAPFRE Middlesea p.l.c.

Conclusion (continued)

In our opinion:

a. in light of our knowledge and understanding of the Company and its environment obtained in the

course of the statutory audit, we have not identified material misstatements with respect to the

information requirements referred to in Capital Markets Rules 5.97.4 and 5.97.5;

b. the Disclosures include the other information required by Capital Markets Rule 5.97; and,

c. the Disclosures include the information required by Appendix 12.1 to Chapter 12 of the Capital

Markets Rules.

The Principal authorised to sign on behalf of KPMG on the work resulting in this assurance report is

Claude Ellul.

KPMG 25 March 2024

Registered Auditors

KPMG, a Maltese civil partnershipand a member firm of the KPMG global The firm is registered as a A list of partners and directors of

organisation of independent member firms affiliated with KPMGpartnership of Certified Publicthe firm is available at Portico

International Limited, a private English company limited guarantee.Accountants in terms of theBuilding, Marina Street, Pietà,

Accountancy Profession ActPTA9044, Malta.


	Page		Page
Chairman's Statement	i.	7. Segment information	154
President & Chief Executive Officer's Statement	vii.	8. Investment return	157
Directors’ Report	1	9. Other income	159
Corporate Governance Statement	16	10. Profit before tax	159
Remuneration Statement and Report of the Remuneration Committee to the Shareholders	36	11. Employee compensation	160
Statement of profit or loss	47	12. Income tax expense	161
Statement of profit or loss and other comprehensive income	48	13. Directors’ emoluments	161
Statement of financial position	49	14. Earnings per share	162
Statement of changes in equity	50	15. Dividends	162
Statement of cash flows	54	16. Intangible assets	163
Notes to the financial statements	55	17. Leases	165
1. Basis of preparation	55	18. Property, plant and equipment	169
2. Accounting policies	62	19. Investment property	173
2.1 Consolidation	62	20. Investment in subsidiary undertakings	181
2.2 Segment reporting	64	21. Investment in associated undertakings	184
2.3 Foreign currency translation	64	22. Other investments	186
2.4 Intangible assets	65	23. Deferred income tax	193
2.5 Property, plant and equipment	65	24. Insurance contract liabilities, reinsurance contract assets and investment contract liabilities	195
2.6 Investment property	66	24.1 Composition of statement of financial position	195
2.7 Investments in subsidiary undertakings	67	24.2 Short-term insurance contracts under PAA model	196
2.8 Investments in associated undertakings	68	24.3 Long-term insurance contracts - Life risk	205
2.9 Financial instruments	68	24.4 Life risk - Reinsurance contracts held	210
2.10 Insurance and investment contracts issued and reinsurance contracts held	82	24.5 Investment contracts with DPF	214
2.11 Current and deferred income tax	106	24.6 Long term contracts - inputs assumptions and estimation techniques	217
2.12 Provisions for pension obligations	107	25. Investment contract liabilities	224
2.13 Revenue recognition	107	26. Trade and other receivables	224
2.14 Investment return	108	27. Cash and cash equivalents	225
2.15 Leases	109	28. Share capital	225
2.16 Impairment of non-financial assets	111	29. Other reserves	226
2.17 Offsetting	111	30. Provision for other liabilities and charges	227
2.18 Dividend distribution	112	31. Other payables	229
2.19 Share capital	112	32. Cash generated from operations	230
2.20 Methods and judgements applied in determining the IFRS 17 transition amount	112	33. Commitments	231
3. Use of accounting estimates and judgements in applying accounting policies	114	34. Contingencies	232
4. Management of risk		35. Related party transactions	232
4.1 Insurance risk	116	36. Statutory information	236
4.2 Financial risk	125	Independent Auditors’ report	238
4.3 Fair values	146	Independent Assurance Report	251
5. Capital management	150
6. Amounts determined in transition to IFRS 17	151