Regulation No. 2009-01 on the Preparation of the Financial Statements of Life Insurance Companies

REGULATION ON THE PREPARATION OF THE FINANCIAL STATEMENTS OF INSURANCE COMPANIES ENGAGING IN LIFE BUSINESS Year 2009 / Number 01 (Consolidated text as of 31/03/2023 – Update V)

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 2 Page intentionally left blank

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 3 TABLE OF CONTENTS PART I GENERAL PROVISIONS ....................................................................................................... 5 Article 1 – Definitions. ................................................................................................................................................................... 5 Article 2 – Scope of application. ............................................................................................................................................. 6 Article 3 – Financial documentation. .................................................................................................................................... 6 Article 4 – Schemes for the preparation of the financial statements and rules for compilation.................................................................... 7 Article 5 – Link between accounting and financial statements. .................................................................................................................. 8 Article 6 – Supervisory information relating to the annual financial statements. ................................................................................... 9 Article 7 – Transmission to the CENTRAL BANK of the annual financial statements. .......................................................................... 9 Article 8 – Provisions for the management of pension funds. ................................................................................................... 9 PART II PROVISIONS APPLICABLE TO THE BALANCE SHEET AND VALUATION CRITERIA ........................................................................................................................................... 9 Article 9 – Balance sheet scheme and instructions for compilation. ......................................................................... 9 Article 10 – Guarantees, commitments and other off-balance sheet items. .............................................................................................................. 9 Article 11 – Durable use fixed assets. ............................................................................................................. 10 Article 12 – Valuation criteria. .............................................................................................................................................. 10 Article 13 – Current value of investments in QUOTED FINANCIAL INSTRUMENTS. .................................................. 12 Article 14 – Current value of land and buildings. .............................................................................................................. 13 Article 15 – Current value of investments traded in unregulated markets and other investments. ....... 13 Article 16 – Transfers of assets between macro-class C and macro-class D. .................................................................... 13 Article 17 – Technical reserves. ...................................................................................................................................................... 14 PART III PROVISIONS APPLICABLE TO THE INCOME STATEMENT ................................................ 15 Article 18 – Income statement scheme and instructions for compilation. ...................................................................... 15 Article 19 – Structure of the income statement. ............................................................................................................................ 15 Article 20 – Variation of premium carry-forward net of reinsurance. ............................................................................ 15 Article 21 – Allocation of investment profit shares. ......................................................................................... 15 PART IV SEMI-ANNUAL REPORT .................................................................................................. 16 Article 22 – Semi-annual report. .............................................................................................................................................. 16 Article 23 – Approval deadline and duties of the statutory auditors..................................................................... 16 Article 24 – Supervisory information. ...................................................................................................................................... 17 Article 25 – Transmission to the CENTRAL BANK of the semi-annual report. ................................................................... 17 PART V AUDIT ........................................................................................................ 17 Article 26 – Report of the audit firm on the financial statements. ............................................................................................... 17 Article 27 – Actuarial auditor. ..................................................................................................................................................... 17 Article 28 – Report of the actuarial auditor. ............................................................................................................................ 17 Article 29 – Report of the audit firm on the semi-annual report. ...................................................................... 18 PART VI AMENDMENTS AND INTEGRATIONS TO THE LIFE REGULATION ....................................... 18 Article 30 – Amendments to CENTRAL BANK Regulation No. 2008-01 on life insurance business.18 PART VII FINAL PROVISIONS ......................................................................................................... 18 Article 31 – Entry into force. ..................................................................................................................................................... 18

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 4 LIST OF APPENDICES .................................................................................................................... 19

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 5 PART I GENERAL PROVISIONS Article 1 – Definitions.

1. For the purposes of this Regulation, the following terms are understood as: • “Central Bank”: the Central Bank of the Republic of San Marino, in its capacity as the supervisory authority for the banking, financial, and insurance system; • “Fair Value”: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; • “Affiliated Company”: for an affiliated company, it is understood as a participating company provided that the conditions set out in Article 1, paragraph 8 of the Companies Law are met; • “Associated Company”: associated companies are understood as companies, other than controlled companies under Article 2 of the LISF, which are subject to the control of the same controlling entity or are subject to unified direction by virtue of an agreement, contract, or clause of their respective statutes, or are characterized by having their administrative bodies composed predominantly of the same persons. Unified direction between companies can also materialize through significant and lasting reinsurance links; • “Group Company”: a controlling company, a controlled company under Article 2 of the LISF, or an associated company is considered a group company; • “Insurance Company”: the company authorized under the Life Regulation to carry out the activity referred to in letter G of Annex 1 of the LISF; • “Participating Company”: a participating company is understood as a company in which a participation is held directly, even through a trustee company or an intermediary person; • “Companies Law”: Law No. 47 of 23 February 2006 and subsequent amendments and integrations; • “LISF”: Law No. 165 of 17 November 2005, on banking, financial, and insurance companies and services; • “Regulated Market”: regulated market as defined in Article 1, letter z), of the LISF; • “Participation”: participation refers to rights, represented by shares or quotas, in the capital of another company which, by creating a situation of lasting link with it, are destined to develop the activity of the participant. It is presumed that a participation exists when a subject holds at least 10 percent of the capital of the participating company or of the voting rights exercisable in the ordinary general meeting; • “Life Regulation”: Central Bank Regulation No. 2008-01 on life insurance business; • “Financial Instruments”: the financial instruments referred to in Annex 2 of the LISF; • “Quoted Financial Instruments”: financial instruments that meet the definition set out in Article 1, letter ii) of the Life Regulation;

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 6 2. In the subsequent articles of this Regulation, words referring to these definitions are printed in bold. 3. Unless otherwise specified, for the purposes of these provisions, the definitions contained in the LISF and in the LIFE REGULATION of the CENTRAL BANK on life insurance business apply.

Article 2 – Scope of application.

1. The provisions of this Regulation apply to INSURANCE COMPANIES having their registered office in the territory of the Republic of San Marino authorized to professionally carry out insurance activity relating to life branches and sub-branches as referred to in Article 5 of the LIFE REGULATION, registered in the register of authorized subjects, as referred to in Article 11 of the LISF.

Article 3 – Financial documentation.

1. The financial statements consist of the balance sheet, the income statement, the notes to the financial statements, and the cash flow statement, and are accompanied by a management report on the operations of the INSURANCE COMPANY, the report of the statutory auditors, and the report of the audit firm including the report of the actuarial auditor. The appendices to the financial statements referred to in Articles 78 (technical report of the appointed actuary), 102 (table demonstrating the solvency margin situation), and 82, paragraph 8 (table of assets covering technical reserves), of the LIFE REGULATION, are prepared according to the schemes reported, respectively, in Appendices A, B, and C to this Regulation.
2. The management report referred to in paragraph 1 must in any case show: a) the evolution of the insurance portfolio; b) the trend of claims in the main branches operated; c) the most significant reinsurance forms adopted in the main branches operated; d) research and development activities and new products launched on the market; e) the essential lines followed in investment policy; f) information regarding litigation, if significant; g) the number and nominal value of own shares or quotas, shares or quotas of the controlling company held in the portfolio, those purchased and those disposed of during the financial year, the corresponding shares of subscribed capital, the consideration, and the reasons for purchases and disposals; h) relationships with GROUP COMPANIES distinguishing between controlling companies, controlled companies, and ASSOCIATED COMPANIES, as well as relationships with AFFILIATED COMPANIES; i) the foreseeable evolution of management, with particular regard to the development of the insurance portfolio, the trend of claims, and any modifications to the reinsurance forms adopted; j) significant events occurring after the end of the financial year.

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 7 In particular, the management report, in addition to explaining what happened during the financial year, must provide indications on significant events occurring between the end of the financial year and the approval of the financial statements, as well as relevant information on the foreseeable evolution of management during the following financial year. 3. INSURANCE COMPANIES are required to publish on their website, within thirty days from approval by the shareholders' meeting, the financial statements accompanied by everything listed in the previous paragraph, with the sole exception of more technical appendices such as the technical report of the appointed actuary and the table of assets covering technical reserves. 4. At least the financial statements of the last three financial years are published on the website.

Article 4 – Schemes for the preparation of the financial statements and rules for compilation.

1. The financial statements are prepared clearly in accordance with the provisions of the LISF, the provisions of the COMPANIES LAW, and this regulation, and represent fairly the financial position, the financial situation, and the economic result of the financial year.
2. If the information required by legal provisions is not sufficient to provide a true and fair view, complementary information necessary for this purpose is provided in the notes to the financial statements.
3. If, in exceptional cases, the application of a legal provision proves incompatible with the principle of true and fair view, the provision must not be applied. In the notes to the financial statements, the reasons for the derogation and its influence on the representation of the financial position, financial situation, and economic result are explained.
4. The administrators of the INSURANCE COMPANY prepare the company's financial statements for each financial year. The financial year of INSURANCE COMPANIES begins on January 1st and ends on December 31st of each year. The financial statements must be approved by the shareholders' meeting by May 31st of the following year.
5. The balance sheet and income statement schemes are reported in Appendix D. The notes to the financial statements scheme is reported in Appendix E. They consist of macro-classes (uppercase letter), classes (Roman numeral), items (Arabic numeral), and sub-items (lowercase letter) of the balance sheet, as well as specific sections (Roman numeral), classes (Arabic numeral), items (lowercase letter), and sub-items of the income statement. New items and sub-items may be added if their content is not included in any of the items or sub-items provided in the schemes referred to in Appendix D.
6. For each item of the balance sheet and income statement, the amount of the previous financial year must also be indicated. If the items are not comparable, those relating to the previous financial year must be adapted; non-comparability and adaptation or the impossibility thereof must be reported in the notes to the financial statements.

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 8 7. The financial statements must be prepared in euros, without decimal places. When rounding amounts, decimals less than 50 cents must be disregarded, and decimals greater than or equal to 50 cents must be rounded up to the next unit. The rounded amount of items is obtained by summing the rounded amounts of sub-items. The algebraic sum of differences resulting from rounding operations on items is included in “other assets/liabilities” for the balance sheet, and in “extraordinary income/expenses” for the income statement. 8. The notes to the financial statements are prepared in thousands of euros. Rounding of data contained therein is carried out to ensure consistency with the amounts shown in the financial statement schemes. 9. The account situation at the opening date of the financial year corresponds to that included in the approved financial statements for the previous financial year. 10. The criteria for preparing the items of the financial statements cannot be modified from one financial year to another. In exceptional cases, derogations to this principle are permitted, provided that in the notes to the financial statements, the reasons for the derogation and its influence on the representation of the financial position, financial situation, and economic result are explained. 11. The recognition of income and expenses occurs in respect of the accruals principle (independent of the date of receipt and payment) and the prudence principle. The latter principle is privileged, provided that no implicit reserves are formed. 12. Depreciation and amortization of asset elements must be carried out exclusively through direct adjustment reducing the value of the elements to which they refer. The inclusion of adjustment funds in liabilities is not permitted. 13. Assets acquired in the name and on behalf of third parties do not appear in the financial statements. Information on such assets is provided in the notes to the financial statements.

Article 5 – Link between accounting and financial statements.

1. The methods of maintaining the accounting system (chart of accounts, accounting criteria, etc.) adopted by the INSURANCE COMPANY must allow for the linkage between accounting results and financial statement items. The information-accounting system must allow for the easy retrieval of all informative elements necessary to ensure such linkage. Similarly, the information-accounting system must contain and allow for the easy retrieval of all informative elements necessary to prepare the notes to the financial statements.

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 9 Article 6 – Supervisory information relating to the annual financial statements.

1. The company provides supervisory information relating to the annual financial statements within the framework of the reports referred to in Article 113 of the LIFE REGULATION.
2. The data reported in the supervisory information, referred to in paragraph 1, must correspond to those indicated in the annual financial statements.

Article 7 – Transmission to the CENTRAL BANK of the annual financial statements.

1. The company transmits to the CENTRAL BANK, within the deadlines referred to in Article 112 of the LIFE REGULATION, the annual financial statements and the documents referred to in Article 3.

Article 8 – Provisions for the management of pension funds.

1. Assets and liabilities relating to pension funds managed by the INSURANCE COMPANY in its own name but on behalf of third parties are recorded in the specific item of assets and liabilities of the balance sheet at their current value. In the annual financial statements, the notes to the financial statements report the composition of the asset portfolio relating to the entirety of the pension funds and the assets relating to each specific management in accordance with the conditions present in the agreement, as well as the indication, for each class of asset, of its cost value. The amount of liabilities relating to each pension fund is also reported, with evidence of any guarantees provided.
2. Assets relating to pension funds managed in the name and on behalf of third parties are included among guarantees, commitments, and other off-balance sheet items.

PART II PROVISIONS APPLICABLE TO THE BALANCE SHEET AND VALUATION CRITERIA Article 9 – Balance sheet scheme and instructions for compilation.

1. The balance sheet must be prepared in accordance with the scheme contained in Appendix D to this Regulation. Appendix F contains instructions for the correct filling of the items of the annual financial statements and the semi-annual report.

Article 10 – Guarantees, commitments and other off-balance sheet items.

1. At the bottom of the balance sheet, all guarantees must appear, mentioning separately those that are real, commitments, and other off-balance sheet items. In the notes to the financial statements, the detail of guarantees provided, commitments, and other off-balance sheet items is indicated, and those in favor of GROUP COMPANIES and other PARTICIPATING COMPANIES are reported separately; the assets of pension funds managed in their name and on their behalf must also appear.

Central Bank of the Republic of San Marino Regulation No. 2009-01 on the preparation of the financial statements of life insurance companies (Update V) 10 Article 11 – Durable use fixed assets.

1. Fixed assets are considered to be of durable use when they are destined to be maintained in the company's assets for the purpose of stable investment, consistent with the economic and financial trend of the company. Specific indication is given in the notes to the financial statements.
2. For the purposes of this Regulation, fixed assets of durable use are considered, subject to different motivated indication in the notes to the financial statements, the investments referred to in classes B “intangible assets”, C.I “land and buildings”, and C.II “investments in group companies and other participating companies”. The classification of investments referred to in class C.III “other financial investments” into the durable use investment sector can be carried out in compliance with the conditions set out in Appendix G.

Article 12 – Valuation criteria.

1. Durable use asset elements are recorded at acquisition or production cost. Accessory costs are also included in acquisition cost. Production cost includes all costs directly attributable to individual asset elements. It may also include other costs for the portion reasonably attributable to the product, relating to the production period and up to the moment from which the asset can be used. For real estate, production cost may include all costs related to them, including financial charges relating to the construction period and up to the moment from which the real estate can be used; in this case, their inclusion in assets must be reported in the notes to the financial statements.
2. The cost of durable use assets, tangible and intangible, whose utilization is limited in time, must be systematically amortized in each financial year in relation to the remaining possibility of utilization. Any modifications

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