Fubon Financial : Insurance Financial Statements(Consolidated) 2022 Q2

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Stock Code:5828

FUBON INSURANCE CO., LTD.

AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors' Report

For the Six Months Ended June 30, 2022 and 2021

Address:	No. 179, Liaoning St., Zhongshan Dist., Taipei, Taiwan
Telephone:	02-66367890

The independent auditors' report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' report and consolidated financial statements, the Chinese version shall prevail.

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Table of contents

		Contents		Page
1.	Cover Page	1
2.	Table of Contents	2
3.	Independent Auditors' Report	3
4.	Consolidated Balance Sheets	4
5.	Consolidated Statements of Comprehensive Income	5
6.	Consolidated Statements of Changes in Equity	6
7.	Consolidated Statements of Cash Flows	7
8.	Notes to the Consolidated Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the consolidated financial statements	8
	(3)	New standards, amendments and interpretations adopted		8～12
	(4)	Summary of significant accounting policies		12～13
	(5)	Significant accounting assumptions and judgments, and major sources		13～14
		of estimation uncertainty
	(6)	Explanation of significant accounts		15～118
	(7)	Related-party transactions		118～134
	(8)	Assets pledged as security	134
	(9)	Commitments and contingencies	134
	(10)	Significant losses due to major disasters	134
	(11)	Significant subsequent events	135
	(12)	Other		135～152
	(13)	Other disclosures
		(a) Information on significant transactions		153～154
		(b) Information on investees	154
		(c) Information on investment in Mainland China		155～157
	(14)	Segment information		158～159

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KPMG

110615	5 7 68 (	101	)	Tel	+ 886 2 8101 6666
68F., TAIPEI 101 TOWER, No. 7, Sec. 5,		Fax	+ 886 2 8101 6667
Xinyi Road, Taipei City 110615, Taiwan (R.O.C.)		Web	home.kpmg/tw

Independent Auditors' Report

To the Board of Directors of FUBON INSURANCE CO., LTD.:

Opinion

We have audited the consolidated financial statements of FUBON INSURANCE CO., LTD. and its subsidiaries (" the Company and its subsidiaries" ), which comprise the consolidated balance sheets as of June 30, 2022, December 31 and June 30, 2021, the consolidated statements of comprehensive income for the three months and six months ended June 30, 2022 and 2021 and consolidated statements of changes in equity and consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Fubon Insurance Co., Ltd and its subsidiaries as of June 30, 2022, December 31 and June 30, 2021,and the results of its consolidated financial performance for the three months and six months ended June 30, 2022 and 2021, and of its consolidated cash flows for the six months ended June 30, 2022 and 2021 in accordance with the Regulations Governing the Preparation of Financial Statements by Insurance Enterprises and International Accounting Standard No.34 " Interim Financial Reporting" , endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the six months ended June 30, 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Based on our judgment, the key audit matters that should be communicated in our report are described below:

1. The valuation of financial instruments

Please refer to Note 4 (g) "Financial instruments" on the consolidated financial statements as of and for the year ended December 31, 2021 for related accounting policy, Note 5 (a) for accounting assumptions and estimates, and Note 6 (y) "Fair value and tiers information" for details of valuation of financial instruments.

The valuation of several financial instruments of the Company and its subsidiaries are measured using the valuation models, which involved the exercise of professional judgments on valuation techniques and important parameters. Therefore, the valuation of financial instruments has been identified as a key audit matter in our audit.

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

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How the matter was addressed in our audit:

1. • Inspecting the process of the management decision on fair value measurement and disclosure of financial instruments;
   • Sample testing to evaluate whether the quoted prices in active markets for financial assets are appropriate;
   • Appointing our valuation specialists to assess the reasonableness of valuation techniques and to test the key parameters of financial assets without active market prices, wherein valuation models are used to ensure that the applied valuation techniques are in accordance with IFRS 13 "Fair Value Measurement" ;
   • Assessing whether expression and disclosure of financial instruments are in accordance with IFRSs.
2. Valuation of investment property
   Please refer to Note 4 (l) "Investment property" on the consolidated financial statements as of and for the year ended December 31, 2021 for related accounting policy, Note 5 (c) for accounting assumptions and estimates, and Note 6 (k) "Investment property" for details of the valuation of investment properties.
   The Company and its subsidiaries hold several investment properties. The investment property appraisals are performed by appraisers from professional valuation agencies using the valuation techniques provided by the " Regulations on Real Estate Appraisal" and market evidences in accordance with the " Regulations Governing the Preparation of Financial statements by Insurance Enterprises" . The selection of appraising methods involved the exercise of significant professional judgments. Therefore, the valuation of investment properties has been identified as a key audit matter in our audit.
   How the matter was addressed in our audit:
3. • Understanding the procedure of investment property appraisals performed by professional agencies, considering whether the professional evaluation agencies select the appropriate valuation method and adoption of significant assumptions or not;
   • Ensuring the presentation and disclosure of investment property are in accordance with IFRSs and the "Regulations Governing the Preparation of Financial statements by Insurance Enterprises";
   • Evaluating whether the management's assessment on the valuation of investment property is reasonable based on the evidences obtained from the audit team and the external estate appraisers joint firms, as well as appraisal reports.
4. Valuation of insurance liability
   Please refer to Note 4 (q) "Insurance liability" on the consolidated financial statements as of and for the year ended December 31, 2021 for related accounting policy, Note 5 (d) for accounting assumptions and estimates, and Note 6 (o) "Insurance liability" for details of the valuation of insurance liability.
   The Company and its subsidiaries measure their insurance liability in accordance with the " Regulations Governing the Provision of Various Reserves" and related administrative interpretations. The important parameters, which involved the exercise of professional judgments in determining various statutory reserves, such as claim development factors, expected claim rates and discount rate adopted by claim reserve; provision factors according to the characteristics of different line adopted by unearned premium reserve, will affect the amount, recognized as insurance liabilities, and net movements in insurance liabilities. Therefore, the valuation of insurance liabilities has been identified as a key audit matter in our audit.

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How the matter was addressed in our audit:

• Testing effectiveness of internal control process on insurance liability.
• Adopting the audit of insurance liabilities performed by our actuarial specialists, including following process:
• • Inspecting whether the calculation and applied parameters are in accordance with the related ordinances, administrative interpretations and code of conduct announced by the Actuarial Institute of the Republic of China;
  • Assessing the reasonableness of actuarial assumptions derived from empirical data and product specification;
  • Sampling inspect the calculation of information's completeness that provision of reserves used, and establishing model to check the amount of provision reserves;
  • Analyzing the movements in insurance liabilities and evaluating whether change in provision adopted by the management are reasonable based on our understanding of industry and market.

Other Matter

FUBON INSURANCE CO., LTD. has additionally prepared its parent company only financial statements as of and for the six months ended June 30, 2022 and 2021, on which we have issued an unqualified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Accounting Standard No.34 "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company and its subsidiaries' ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and its subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit Committee) are responsible for overseeing the Company and its subsidiaries' financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 the auditing standards generally accepted in the Republic of China 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 consolidated financial statements.