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HMRC internal manual

General Insurance Manual

Accounting framework: example of annual accounting

A simple annual account might look as follows. For ease of presentation some headings are missing, and comparative figures for the previous year are omitted, although they must be shown in published accounts.

Direct Insurance Co Ltd - Accounts to 31 December 2008


Technical Account - General Business £m £m £m
Earned premiums net of reinsurance      
Gross premiums 95    
Less: outward reinsurance premiums (20) 75  
Gross change in UPP and URP 8    
Less: reinsurance (2) 6 69
Investment return allocated from non-technical a/c     8
Claims incurred net of reinsurance      
Gross amount 40    
Less: reinsurers share (10) 30  
Change in provision for claims outstanding      
Gross amount 50    
Less: reinsurers share (20) 30  
Net operating expenses      
Acquisition costs   8  
Change in deferred acquisition costs   (1)  
Administrative expenses   13  
Reinsurance commissions receivable   (1) (19)
Other technical charges, net of reinsurance     (2)
Result of the general business technical account transferred to the non-technical account     (4)



Non-Technical Account £m £m
Balance on the general business technical a/c   (4)
Investment income    
Income from land and buildings 7  
Income from other investments 14 21
Unrealised gains on investments   3
Investment expenses and charges    
Investment management expenses 1  
Losses on the realisation of investments 1 (2)
Investment return transferred to the technical a/c   (8)
Profit on ordinary activities before tax   10
Tax on profit on ordinary activities   (3)
Profit on ordinary activities after tax   7



The technical provisions would appear under Liabilities on the balance sheet as follows:



Technical Provisions at 31 December 2008 2007
  £m £m
Provision for Unearned premiums    
Gross amount 44 36
Less reinsurance (6) (4)
  38 32
Claims outstanding    
Gross amount 300 250
Less reinsurance (190) (170)
  110 80



The deferred acquisition costs should be separately disclosed on the balance sheet as an asset.