Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697753175217.pdf (Georgia)
2020 Translated from original Georgian JSC Insurance Company TAO Financial Statements and Independent Auditors’ Report For the year ended December 31, 2020 JSC Insurance Company TAO For the year ended December 31, 2020 Independent Auditor's Report 3-4 Financial Statements 5 Statement of Profit or Loss and Other Comprehensive Income 6 Statement of Financial Position Statement of Changes In Equity 7 Statement of Cash Flows 8 Notes to the Financial Statements 1.

Corporate information 2.


Basis of preparation 3.

Significant accounting policies 4.

Significant accounting judgments, estimates and assumptions 5.

New standards and interpretations not yet adopted 6.

Net earned premiums 7.

Gross benefits and claims paid 8.

Change in outstanding claims 9.

Subrogations and recoveries 10.

Acquisition costs 11.

Net interest income 12.

General and administrative expenses 13.

Net foreign exchange rate effect on foreign currency 14.

Income tax expense 15.


Cash and cash equivalents 16.

Amounts due from credit institutions 17.

Insurance receivable 18.

Trade and other receivables 19.

Loans issued 20.

Other financial assets 21.

Prepayments 22.

Other liabilities 23.

Insurance contract liabilities 24.

Share capital 25.

Financial risk management 26.

Capital risk managemen 27.

Contingent liabilities and unforeseen circumstances 28.

Related party balances and transactions 29.
Events after reporting period 9 9 10 15 16 17 18 18 18 19 19 19 20 20 20 20 20 21 22 22 22 22 23 23 23 25 26 26 27 Independent auditor’s report To the Shareholders and the Supervisory Board of JSC “Insurance Company Tao” Opinion We have audited the financial statements of JSC “Insurance Company Tao” (the "Company"), which comprise the statement of financial position as at 31 December 2020, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”).

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 “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report.
We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “IESBA Code”) and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code together with the ethical requirements that are relevant to our audit of the financial statements in Georgia.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information Management is responsible for the other information.

The other information comprises the Management Report for the year ended 31 December 2020, but does not include the financial statements and our auditor’s report thereon.

The management report is expected to be made available to us after the date of this auditor's report.

Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially consistent with the financial statements and with the regulatory requirements, or otherwise appears to be materially misstated based on our knowledge obtained in the audit.
If, based on the work we perform on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact.
Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines 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, management is responsible for assessing the Company’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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s 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 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 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 judgment and maintain professional scepticism throughout the audit.
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.

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 internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s 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 ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s report.

However, future events or conditions may cause the Company 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.

We communicate with those charged with governance 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.
Sophiko Ghudushauri, The engagement partner (SARAS-A-835962) Nexia TA LLC (SARAS-A-550338) April 14, 2021 Tbilisi, Georgia JSC Insurance Company TAO Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2020 (In thousands of Georgian Lari) Notes 6 6 Gross premiums written Written premiums ceded to reinsurers Net premiums Change in unearned premium provision, gross 6 Change in unearned premium provision, reinsurers share 6 Net earned premiums 6 7 Gross benefits and claims paid Change in outstanding claims 8 Net claims Subrogations and recoveries Acquisition costs Insurance activity result Net interest income General and administrative expenses Net foreign exchange rate effect on foreign currency Income from penalties Other income/(expense) Profit before tax Income tax expense Net profit/(loss) for the year Other comprehensive income Total comprehensive income for the year 11 12 13 9 10 14 2020 4,978 - 4,978 408 - 5,386 (3,125) (688) (3,813) 520 (279) 1,814 1,327 (434) 179 27 (3) 2,910 (500) 2,410 - 2,410 2019 6,622 - 6,622 (317) (4) 6,301 (2,297) (1,296) (3,593) 363 (282) 2,789 1,132 (566) 98 24 51 3,528 (555) 2,973 - 2,973 These financial statements were approved and signed on behalf of management on April 14, 2021: Lasha Khakhutaishvili General director Teona Jikia Reporting manager The notes on pages 9-27 are an integral part of these financial statements 5 JSC Insurance Company TAO Statement of Financial Position As of 31 December 2020 (In thousands of Georgian Lari) Assets Cash and cash equivalents Amounts due from credit institutions Insurance receivable Trade and other receivables Loans issued Other financial assets Prepayments Deferred acquisition costs Right-of-use asset Intangible assets Total assets Liabilities Other liabilities Insurance contracts liabilities Lease liability Total liabilities Equity Share capital Retained earnings Total equity Total liabilities and equity Notes 31 December 2020 31 December 2019 918 7,452 2,411 591
These financial statements were approved and signed on behalf of management on April 14, 2021: Lasha Khakhutaishvili General director Teona Jikia Reporting manager The notes on pages 9-27 are an integral part of these financial statements 6 JSC Insurance Company TAO Statement of Changes in Equity For the year ended 31 December 2020 (In thousands of Georgian Lari) 31 December 2018 Comprehensive income for the year Dividends paid 31 December 2019 Comprehensive income for the year Dividends paid 31 December 2020 Share capital (Note 24) Retained earnings 2,500 - - 2,500 - - 2,500 7,287 2,973 (1,500) 8,760 2,410 (2,100) 9,070 Total 9,787 2,973 (1,500) 11,260 2,410 (2,100) 11,570 These financial statements were approved and signed on behalf of management on April 14, 2021: Lasha Khakhutaishvili General director Teona Jikia Reporting manager The notes on pages 9-27 are an integral part of these financial statements 7 JSC Insurance Company TAO Statement of Cash Flows For the year ended 31 December 2020 (In thousands of Georgian Lari) Cash flows from operating activities Insurance premiums received Reinsurance premiums paid Insurance benefits and claims paid Acquisition costs paid Salaries and benefits paid Proceeds from regress and salvage Interest received Tax paid except income tax Other operating expenses paid Net cash flows from operating activities before income tax Income tax paid Net cash flows from operating activities Cash flows from investing activities Loan Issued Proceeds from repayment of loan issued Placement of bank deposits Withdrawal of bank deposits Net cash flows from/(used in) investing activities Cash flows from financing activities Dividends paid Net cash flows used in financing activities Net change in cash and cash equivalents Cash and cash equivalents, 1 January Cash and cash
 equivalents, 31 December Notes 2020 2019 4,814 - (2,895) (20) (59) 52 843 (8) (291) 2,436 (958) 1,478 (1,404) 2,200 (3,189) 3,316 923 (2,100) (2,100) 301 617 918 5,973 (10) (1,923) (171) (53) 287 580 (31) (220) 4,432 (486) 3,946 (4,170) 2,388 (4,010) 3,309 (2,483) (1,500) (1,500) (37) 654 617 24 15 These financial statements were approved and signed on behalf of management on April 14, 2021: Lasha Khakhutaishvili General director Teona Jikia Reporting manager The notes on pages 9-27 are an integral part of these financial statements 8 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 1.
Corporate information JSC Insurance Company Tao (hereign after the "Company") is a Joint Stock Company domiciled in, and registered under the laws of Georgia.

The Company was founded on August 22, 2007 and provides different insurance products in Georgia.

The Company’s legal address is Berbuki street N1, 3rd floor, commercial space N 12, Tbilisi, Georgia.
As of 31 December 2020 and 31 December 2019, the shareholder of the Company is JSC “Insurance Company Aldagi” – 100%, the sole owner of which is “A Group” and the ultimate holder is Georgia Capital PLC.

(incorporated in the United Kingdom and its shares are listed on the London Stock Exchange) as of 31 December 2020 and 31 December 2019.

The insurance license was given to the Organization on August 27, 2007.
License certificates: #NL012 (non-life) and #L012 (life) issued by LEPL Insurance State Supervision Service of Georgia.

Governing body of the Company is the General Assembly.

The activities are supervised by the Supervisory Board, whose members are elected by the General Assembly.

The General Assembly is held once a year, no later than 2 months after the issuance of the external auditor's report.

Day to day activities of the Company are managed by general director of the Company.
As of the years- end 2020 and 2019 general director of the company is Lasha Khakhutaishvili.

2.

Basis of preparation General information These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB).

The Company has applied the temporary exemption from IFRS 9 Financial Instruments and plans to have the initial application on 1 January 2023.
This financial information is presented in Georgian Lari ("GEL") rounded to nearest thousand, unless otherwise stated.

Going Concern Management has prepared these financial statements on a going concern basis.

In making this judgment management considered the Company’s financial position, current intentions, the profitability of operations and access to local and international financial resources, as necessary.
Insurance industry has faced challenges as a result of spread of the COVID 19 around the world and in Georgia.

The Company has assessed the future perspectives in the current situation and, as a result, the Company's management believes that there is no doubt about the Company's ability to continue as a going concern for at least the following 12 months after reporting period.
9 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 3.

Significant accounting policies The following significant accounting policies used in the preparation of these financial statements consistently apply to all periods presented, unless otherwise stated.

Functional and presentation currency, foreign currency conversion The functional currency of the Company is national currency of Georgia – Georgian Lari (GEL).
Transactions in foreign currencies are initially recorded in the functional currency using the spot rate at the date of the transaction determined by National Bank of Georgia.

Foreign currency monetary items at the reporting date are translated using the closing rate determined by National Bank of Georgia.

All exchange differences arising on settlement are recognized in profit or loss.
The principal rate of exchange used for translating foreign currency monetary balances were as follows: 31 December 2020 31 December 2019 1 USD/GEL 1 EUR/GEL The average rate during the year was as follows: 1 USD/GEL 1 EUR/GEL Basis of measurement 3.2766 4.0233 2020 3.1097 3.5519 2.8677 3.2095 2019 2.8192 3.1553 The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.
Reporting period The Company's reporting period covers one calendar year: January 1 to December 31.

Insurance contracts Insurance contracts are those contracts that carry significant insurance risk at the time of signing, or those contracts that contain, at the time of signing, a scenario of commercial content in which insurance risk can be significant.

A significant amount of insurance risk depends on both the probability of the insured event occurring and the extent of its possible impact.
Once a contract falls under the category of insurance contracts, it remains an insurance contract for the remaining period, even if the insurance risk is substantially reduced during this time unless all rights or obligations are fulfilled or their term expires.

Insurance and reinsurance receivables Insurance and reinsurance receivables are recognised based upon insurance policy terms and measured at cost.
The carrying value of insurance and reinsurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with any impairment loss recorded in the statement of profit or loss and other comprehensive income.

10 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 3.
Significant accounting policies (continued) Reinsurance receivables primarily include balances due from both insurance and reinsurance companies for ceded insurance liabilities.

Premiums on reinsurance assumed are recognised as revenue in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business.
Amounts due to reinsurers are estimated in a manner consistent with the associated reinsured policies and in accordance with the reinsurance contract.

Premiums ceded and claims reimbursed are presented on a gross basis.

An impairment review is performed on all ceded share of technical provisions when an indication of impairment occurs.
Reinsurance receivables are impaired only if there is objective evidence that the Company may not receive all amounts due to it under the terms of the contract and that this can be measured reliably.

Insurance contract liabilities Insurance contract liabilities include the outstanding claims provision and the provision for unearned premium.
The outstanding claims provision is based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported (RBNS) or not (IBNR), together with related claims handling costs and a reduction for the expected value of salvage and other recoveries.

Delays can be experienced in the notification and settlement of certain types of claims.

Therefore, the ultimate cost of these cannot be known with certainty at the reporting date.
IBNR is calculated at the reporting date using past statistics.

The provision for unearned premiums (UPR) represents that portion of premiums received or receivable that relates to risks that have not yet expired at the reporting date.

The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the pattern of insurance service provided under the contract.
General business contract liabilities are based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries.

The liability is calculated at the reporting date using a range of standard claim projection techniques, based on empirical data and current assumptions.

The liability is not discounted for the time value of money.
No provision for equalisation or catastrophe reserves is recognized.

The liabilities are derecognised when the obligation to pay a claim expires, is discharged or is cancelled.

The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the pattern of insurance service provided under the contract.
At each reporting date the carrying amount of unearned premium is calculated on active policies based on the insurance period and time until the expiry date of each insurance policy.

The Company reviews its unexpired risk based on historical performance of separate business lines to determine overall change in expected claims.
The differences between the unearned premium reserves, loss provisions and as well as the expected claims are recognised in the statement of profit or loss and other comprehensive income by setting up a provision for premium deficiency.

Liability adequacy test The adequacy of the liability is tested to determine whether the expected claims exceeds unearned premium (minus deferred acquisition cost).
Deferred acquisition costs Deferred acquisition costs (“DAC”) are capitalized and amortized on a straight line basis over the life of the contract.

All other acquisition costs are recognised as an expense when incurred.

Acquisition costs deferred consist of commissions to sales agents and brokerage companies assisting in policy issuance.
Cash and cash equivalents Cash and cash equivalents consist of cash on hand, current accounts and bank deposits that mature within three months from the date of origination and are free from contractual encumbrances.

11 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 3.
Significant accounting policies (continued) Financial assets Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.
The Company determines the classification of its financial assets upon initial recognition.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment.

All transaction costs directly attributable to the acquisition are also included in the cost of the investment.
Subsequent to initial recognition, these investments are carried at amortized cost using the effective interest method.

Gains and losses are recognised in the profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortization process.

Regress and other receivables are recognised at their original invoiced value.

Where the time value of money is material, receivables are carried at amortized cost.
Offsetting Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Income and expense will not be offset in the statement of profit of loss and other comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Company.

Allowances for impairment of financial assets The Company assesses at each reporting date whether a financial asset or group of financial assets is impaired.
If there is objective evidence that an impairment loss on financial assets carried at amortized cost has been incurred, 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 (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e.

the effective interest rate computed at initial recognition).
The carrying amount of the asset is reduced through use of an allowance account.

The amount of the impairment loss is recognized in the statement of profit or loss and other comprehensive income.

Assets carried at amortized cost The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not the foreclosure is probable.
The Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant.
If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed 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 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.

Any subsequent reversal of an impairment loss is recognised in the statement of profit or loss and other comprehensive income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
When an asset is uncollectible, it is written off against the related allowance for impairment.

Such assets are written off after all necessary procedures have been completed and the amount of the loss has been determined.

Subsequent recoveries of amounts previously written off decrease the charge for impairment of financial assets in the statement of profit or loss and other comprehensive income.
12 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 3.
Significant accounting policies (continued) Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a company of similar financial assets) is derecognized where: ► The rights to receive cash flows from the asset have expired; ► The Company has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; and ► The Company either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Where the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Leases The Company as a lessee For any new contracts entered into on or after 1 January 2019, the Company considers whether a contract is, or contains a lease.

A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.
To apply this definition, the Company assesses whether the contract meets key evaluations which are whether: a) the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company; b) the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract the Company has the right to direct the use of the identified asset throughout the period of use.
The Company assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use; Measurement and recognition of leases as a lessee At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the balance sheet.
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company’s incremental borrowing rate.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest.

It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

13 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 3.
Significant accounting policies (continued) When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients.
Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

On the statement of financial position, right-of-use assets can be included in property, plant and equipment or presented separately and lease liabilities can be included in trade and other payables or presented as a separate liability.
Income tax Income tax currently payable is calculated using the tax rates in force or substantively enacted at the reporting date.

Taxable profit differs from accounting profit either because some income and expenses are never taxable or deductible, or because the time pattern that they are taxable or deductible differs between tax law and their accounting treatment.
Using the statement of financial position liability method, deferred tax is recognised in respect of all temporary differences between the carrying value of assets and liabilities in the statement of financial position and the corresponding tax base.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are recognised only to the extent that the Company considers that it is probable (i.e.

more likely than not) that there will be sufficient taxable profits available for the asset to be utilised within the same tax jurisdiction.

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets against current tax liabilities, they relate to the same tax authority and the Company’s intention is to settle the amounts on a net basis.
The tax expense for the period comprises current and deferred tax.

Tax is recognised in profit or loss, except if it arises from transactions or events that are recognised in other comprehensive income or directly in equity.

In this case, the tax is recognised in other comprehensive income or directly in equity, respectively.
Provisions and contingent liabilities Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of obligation can be made.
Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is more probable than not.

Contingent liabilities are not recognized in the statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote.

A contingent asset is not recognized in the statement of financial position but disclosed when an inflow of economic benefits is probable.
Capital Share capital Ordinary shares are classified as equity.

Any excess of the fair value of consideration received over the par value of shares issued is recognised as additional paid-in capital.

Dividends Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date.
Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the financial statements are authorised for issue.

14 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 3.
Significant accounting policies (continued) Income and expense recognition Gross premiums and provision for unearned premiums Gross insurance written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the reporting period.

They are recognised on the date on which the policy commences.

Premiums include any adjustments arising in the reporting period for premiums receivable in respect of business written in prior accounting periods.
Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date.

Unearned premiums are calculated on a daily pro rata basis.

The proportion attributable to subsequent periods is deferred as a provision for unearned premiums.
Insurance claims Insurance claims include all claims occurring during the year, whether reported or not, claims handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and other recoveries (subrogation), and any adjustments to claims outstanding from previous years.

Impairment of non-financial assets At each reporting date assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss.
If there is an indication of possible impairment and the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

Recoverable amount is higher of fair value less costs to sell and value is use.

Joint Arrangements: Joint Operation A joint arrangement is an arrangement of which two or more parties have joint control.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

Those parties are called joint operators.
A joint operator shall recognise in relation to its interest in a joint operation: (a) its assets, including its share of any assets held jointly; (b) its liabilities, including its share of any liabilities incurred jointly; (c) its revenue from the sale of its share of the output arising from the joint operation;(d) its share of the revenue from the sale of the output by the joint operation; and (e) its expenses, including its share of any expenses incurred jointly.

4.
4.

Significant accounting judgments, estimates and assumptions The Company makes certain estimates and assumptions regarding the future.

Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In the future, actual experience may differ from these estimates and assumptions.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Liabilities arising from insurance contracts The estimation of the ultimate liability arising from claims is the Company’s most critical accounting estimate.
There are several sources of uncertainty that need to be considered in the estimation of the liability that the Company will ultimately pay for those claims.

Estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported (IBNR) at the reporting date.

It can take a significant period of time before the ultimate claims cost can be established with certainty.
General insurance claims provisions are not discounted for the time value of money.

The ultimate cost of IBNR is estimated by using a range of standard actuarial claims projection techniques, such as Chain ladder method; the main assumption underlying this technique is that a company’s past claims development experience can be used to project future claims development and hence ultimate claims costs.
As such, these methods extrapolate the development of paid and incurred 15 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 4.

Significant accounting judgments, estimates and assumptions (continued) losses, average costs per claim and claim numbers based on the observed monthly development of past year and expected loss ratios.
Allowance for impairment of insurance receivables and reinsurance receivables The company regularly reviews its insurance receivables to assess impairment.

For accounting purposes, the Company uses an incurred loss model for the recognition of losses on impaired financial assets.

This means that losses can only be recognised when objective evidence of a specific loss event has been observed.
Triggering events include significant financial difficulty of the customer and/or breach of contract such as default of payment.

The amount of allowance is reduced by an amount of debt that the company has adequate reasons to believe will be recovered.

Management judgment is that historical trends can serve as a basis for predicting incurred losses and that this approach can be used to estimate the amount of recoverable debts as at the reporting period end.

5.
5.

New standards and interpretations not yet adopted IFRS 9 “Financial Instruments “ In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9.

IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting.
IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted.

Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory.

For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.
The company has decided to defer the application of IFRS 9 until the earlier of the effective date of the new insurance contracts standard (IFRS 17) of 1 January 2023, applying the temporary exemption from applying IFRS 9 as introduced by the amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts.
In September 2016, the IASB issued amendments to IFRS 4 to address issues arising from the different effective dates of IFRS 9 and the upcoming new insurance contracts standard (IFRS 17).

The amendments introduce two alternative options for entities issuing contracts within the scope of IFRS 4, notably a temporary exemption and an overlay approach.

The temporary exemption enables eligible entities to defer the implementation date of IFRS 9 (the “deferral approach”).
At its meeting after in January 2018, the IASB tentatively decided to extend the use of the deferral approach to IFRS 9 for a further year, so that the eligible entities would only be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023 at the latest.
An entity may apply the temporary exemption from IFRS 9 if: (i) it has not previously applied any version of IFRS 9 before and except for requirements relating to the presentation of income or loss on financial liabilities that the entity, in its sole discretion, has classified as measured at fair value through profit or loss; And (ii) its activities are predominantly connected with insurance on its annual reporting date that immediately precedes 1 April 2016, or for the next annual reporting date.
The overlay approach allows an entity applying IFRS 9 to reclassify between profit or loss and other comprehensive income an amount that results in the profit or loss at the end of the reporting period for the designated financial assets being the same as if an entity had applied IAS 39 to these designated financial assets.

The company may apply for a temporary exemption from the use of IFRS 9 for January 1, 2018, or for annual periods thereafter.
The company may start using the overlap approach when it first starts using IFRS 9.

During 2017, the company evaluated the existing changes and came to the conclusion that its activities are predominantly related to insurance as of December 31, 2015.
IFRS 17 “Insurance Contracts” In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure, which replaces IFRS 4 Insurance Contracts.
In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies for measurement purposes, IFRS 17 provides a comprehensive model (the general model) for insurance contracts, supplemented by the variable fee approach for contracts with direct 16 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 5.
New standards and interpretations not yet adopted (continued) IFRS 17 “Insurance Contracts” (continued) participation features that are substantially investment-related service contracts, and the premium allocation approach mainly for short-duration which typically applies to certain non-life insurance contracts.

IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023, with comparative figures required.
Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17.

Retrospective application is required.

However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach.

6.
Net earned premiums Net earned premiums for the years ended December 31, 2020 and 2019 comprise: Gross premiums written Change in the gross provision for unearned premiums Gross earned premiums Less: written premiums ceded to reinsurers Change in reinsurers’ share in the gross provision for unearned premiums Net earned premiums 2020 2019 Gross premiums written Change in the gross provision for unearned premiums Gross earned premiums Less: written premiums ceded to reinsurers Change in reinsurers’ share in the gross provision for unearned premiums Net earned premiums Motor insurance(Casco) 3,596 350 3,946 - - 3,946 Motor insurance(Casco) 4,136 (339) 3,797 - (4) 3,793 CMTPL MTPL Other Total 1,203 45 1,248 - - 1,248 136 18 154 - - 154 43 (5) 38 - - 38 4,978 408 5,386 - - 5,386 CMTPL MTPL Other Total 2,261 (23) 2,238 - - 2,238 199 39 238 - - 238 26 6 32 - - 32 6,622 (317) 6,305 - (4) 6,301 17 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 7.
Gross benefits and claims paid Gross benefits and claims paid for the years ended December 31, 2020 and 2019 is presented as follows: Motor Own Damage Motor Third Party Liability CMTPL Motor Personal Accident Total gross benefits and claims paid 8.
Change in outstanding claims 2020 2,813 219 93 - 3,125 2019 1,966 198 123 10 2,297 Change in outstanding claims for the year ended December 31, 2020 and 2019 is presented as follows: 2020 Motor insurance(Casco) MTPL CMTPL Other Total 2019 Motor insurance(Casco) CMTPL MTPL Other Total Change in provisions for reported but not settled claims 655 8 7 - 670 Change in provisions for incurred but not reported claims 15 2 1 - 18 Change in outstanding claims 670 10 8 - 688 Change in provisions for reported but not settled claims 1,317 (13) (14) - 1,290 Change in provisions for incurred but not reported claims 2 - 4 - 6 Change in outstanding claims 1,319 (13) (10) - 1,296 9.
Subrogations and recoveries Subrogations and recoveries for the year ended december 31, 2020 and 2019 is presented as follows: Income from regress Income from the evaluation and sale of damaged assets Impairment expense for receivables from regression Total subrogations and recoveries 2020 768 464 (712) 520 2019 423 319 (379) 363 18 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 10.
Acquisition costs Acquisitions costs for the year ended December 31, 2020 and 2019 is presented as follows: Insurance Commission expense Total acquisition costs Change in deferred acquisition costs Acquisition costs for the year Analysis of movement in deferred acquisition costs Deferred acquisition costs at the beginning of the year Change in deferred acquisition costs Deferred acquisition costs at the year end 2020 275 275 4 279 2020 43 (4) 39 11.
Net interest income Net interest income for the years ended December 31, 2020 and 2019 comprise Interest income from deposits Interest income from loans issued Interest income from current account Interest income from promissory note Interest expense 2020 880 403 24 26 (6) 2019 261 261 21 282 2019 64 (21) 43 2019 665 412 31 25 (1) Total net interest income 1,327 1,132 Interest expense represents the interest related to the lease liability and amounts to GEL6 for the year ended December 31, 2020 (GEL1 for the year ended December 31, 2019).
12.
General and administrative expenses General and administrative expenses for years ended December 31, 2020 and 2019 is presented as follows: 2020 2019 Membership fee Impairment allowance expense for insurance receivables Salaries and other employee benefits Supervisory fee Audit fee Depreciation and amortizations expense Bank fees Bonus expense Rent expense Other general and administrative expenses Total general and administrative expenses 196 72 69 54 19 13 2 - - 9 434 275 - 84 63 14 4 2 104 7 13 566 19 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 13.
Net foreign exchange rate effect on foreign currency Net foreign exchange rate effect on foreign currency for the year ended December 31, 2020 and 2019 is presented as follows: Foreign exchange rate gain Insurance receivable Other liabilities Foreign exchange rate loss Insurance receivable Other liabilities FX effect on foreign currency 14.
Income tax expense 2020 416 412 4 (237) (235) (2) 179 2019 276 276 - (178) (178) - 98 The Company's income tax expense comprises only current income tax expense for the years ended December 31, 2020 and 2019 amounting to GEL 500 and GEL 555, respectively.

The movement in deferred tax asset amounted to GEL 64 due to temporary and permanent changes.

The company does not recognize the deferred income tax asset as it believes that this asset cannot be used until 2023.
From January 1, 2023, the corporate income tax company will be transferred to a new model, which will no longer have the difference between the financial profit and the tax profit, therefore, the deferred tax will not be applicable.

15.

Cash and cash equivalents Cash and cash equivalents as of December 31, 2020 and 2019 are presented as cash in bank in the national currency and amounted to GEL 918 and GEL 617, respectively.

Cash balance in bank accounts is classified as risk-free.

16.
16.

Amounts due from credit institutions Amounts due to from credit institutions as of December 31, 2020 and 2019 comprise: Deposits in the Bank Interest receivable for deposits Total amounts due from credit institutions 31 December 2020 31 December 2019 6,525 927 7,452 6,651 736 7,387 As of 31 December 2020 and 31 December 2019 amounts due from credit institutions are represented by short-term and long-term placements and earn annual interest of 10.15% to 14,6%.
Information on interest income from deposits is presented in note 12.

Funds placed in banks are classified as non-risky, given the fact that the banks where the company has deposits are trustworthy.

17.
17.

Insurance receivable Insurance receivable as of December 31, 2020 and 2019 comprise: Motor insurance(Casco) CMTPL Guarantees Credit and life disability Other Allowance for insurance receivables Total insurance receivable 31 December, 2020 31 December, 2019 2,284 77 25 - 128 (103) 2,411 3,144 208 8 61 2 (828) 2,595 20 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 17.
Insurance receivable (continued) The analysis of the movement of the allowance for the insurance receivable is presented below: Balance as at 31 December 2018 Accrual over a period Recovery over a period Revaluation effect Balance as at 31 December 2019 Accrual over a period Recovery over a period Write off Revaluation effect Balance as at 31 December 2020 18.
Trade and other receivables Trade and other receivables as of December 31, 2020 and 2019 comprise: Insurance Receivables 778 21 (23) 52 828 115 (43) (776) (21) 103 Receivables from regression Receivables from subrogations and recoveries Damaged assets through subrogation Other receivables Impairment reserve for receivables from regression Total trade and other receivables 31 December 2020 31 December 2019 465 - 42 - 1,159 382 207 2 (1,159) 591 (456) 51 The analysis of the movement of the allowance for the trade and other receivables is presented below: Balance as at 31 December 2018 Accrual over a period Recovery over a period Write off Balance as at 31 December 2019 Accrual over a period Recovery over a period Balance as at 31 December 2020 Impairment reserve for receivables from regression Impairment reserve for other receivables Total 77 423 (44) - 456 776 (73) 1,159 14 - - (14) - - - - 91 423 (44) (14) 456 776 (73) 1,159 21 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 19.
Loans issued Loans issued as of December 31, 2020 and 2019 comprise: Loans issued Interest receivable for loans issued Total Loan Issued 31 December 2020 31 December 2019 4,234 5,030 524 221 4,758 5,251 As of 31 December 2020 the company has issued a loan to the related party which equals to GEL4,234 (GEL5,030 as of 31 December 2019).

The annual interest rate is 12% and the maturity date is December 2021.

Information regarding transactions with the related parties is given in the note 28.
Information on interest income is presented in note 12.

20.

Other financial assets Other financial assets as of December 31, 2020 and 2019 comprise: Promissory note Interest receivable for promissory note Total other financial assets 31 December 2020 31 December 2019 200 200 7 - 207 200 As of 31 Decemer 2020 finance assets are presented by one-year promissory note from the microfinance organization, with annual interest of 13% and the maturity date is 28th September, 2021.
As of 31 December 2019 finance assets are presented by one-year promissory note from the microfinance organization, with annual interest of 13% and the maturity date was 28th September, 2020.

The promissory note holder cannot withdraw funds during the promissory note term.

21.
21.

Prepayments Prepayments as of December 31, 2020 and 2019 comprise: Prepaid income tax Membership fee prepayment Prepayments related to subrogated assets Prepaid salary Other prepayments Total prepayments 31 December 2019 31 December 2020 112 77 - 8 25 - 97 65 13 25 222 200 22.
Other liabilities Other liabilities as of December 31, 2020 and 2019 comprise: Other financial liabilities Acquisition cost payable Trade payables Claims payable Tax liabilities Current income tax liabilities Income tax liabilities Total other liabilities 31 December 2020 31 December 2019 382 150 122 110 417 346 71 799 375 215 102 58 75 - 75 450 22 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 23.
Insurance contract liabilities Insurance contract liabilities as of December 31, 2020 and 2019 comprise: Unearned premium reserve Reported but not settled claims Incurred but not reported claims Total insurance contract liabilities 24.

Share capital 31 December 2020 31 December 2019 2,459 1,820 9 4,288 2,051 2,490 27 4,568 The capital consists of 2,500,000 ordinary shares.

The nominal value of 1 share is GEL1 (one) (not in thousands).
As of 31 December 2020 and 31 December 2019, the shareholder of the Company is JSC “Insurance Company Aldagi” – 100%.

Retained earnings represent the portion of net profit that is undistributed.

In February 2020, the Company announced the paid dividends of GEL2,100 (GEL1,500 in 2019).

25.

Financial risk management The risk management function within the Company is carried out in respect of financial risks, operational risks and legal risks.
The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks.

Financial risk comprises market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits.
Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.
Amounts due from credit institutions Loans issued Insurance receivable Cash and cash equivalents Other financial assets Trade and other receivables Total credit risk exposure Note 16 19 17 15 20 18 31 December 2020 31 December 2019 7,387 5,251 2,595 617 207 51 16,108 7,452 4,758 2,411 918 200 591 16,330 Credit risk is related to the impairment of the above mentioned financial assets.
Market risk - Derives from (a) interest rate risk (b) currency risk, which is affected by general and specific changes in the market.

Interest rate risk - changes in floating interest rates might adversely impact Company's financial position and cash flow, although the Company's financial instruments are at fixed rates, thus the interest rate risk does not currently affect the Company.
Currency risk - The Company is exposed to effects of fluctuation in the prevailing foreign currency exchange rates on its financial position and cash flow.

The Company's assets, namely, insurance receivables, are denominated in several foreign currencies, and liabilities are translated and fixed in the functional currency at the rate specified by the National Bank of Georgia at the date of the operation.

Liquidity risk - liquidity risk is the risk that the Company will be unable to meet its obligations.
The Company’s policy is to run a prudent liquidity management policy by means of holding sufficient cash and bank balances, as well as highly liquid assets for making all operational and debt service related to 23 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 25.

Financial risk management (continued) payments when those become due.
The maturity analysis of financial liabilities as at 31 December 2020 and 31 December 2019 are as follows 31 December 2020 Financial assets Amounts due from credit institutions Loans issued Insurance receivable Cash and cash equivalents Other financial assets Trade and other receivables Total financial assets Financial liabilities Insurance contracts liabilities Other liabilities Lease liability Total financial liabilities Net liquidity position 31 December 2019 Financial assets Amounts due from credit institutions Loans issued Insurance receivable Cash and cash equivalents Other financial assets Trade and other receivables Total financial assets Financial liabilities Insurance contracts liabilities Other liabilities Lease liability Total financial liabilities Net liquidity position Up to 1 year 1 year to 5 years Over 5 years 6,652 4,758 2,411 918 200 591 15,530 4,568 450 7 5,025 10,505 800 - - - - 800 - - 24 24 776 - - - - - - - - - - - - Up to 1 year 1 year to 5 years Over 5 years 4,551 5,251 2,595 617 207 51 13,272 4,288 799 14 5,101 8,171 2,836 - - - - 2,836 - - 39 39 2,797 - - - - - - - - - - - - Total 7,452 4,758 2,411 918 200 591 16,330 4,568 450 31 5,049 11,281 Total 7,387 5,251 2,595 617 207 51 16,108 4,288 799 53 5,140 10,968 The Company believes that it will pay all its liabilities on time.
To do this, the company expects sufficient cash flows from operating activities 24 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 26.

Capital risk management Capital management objectives, policy and approaches The main purpose of capital management is to continuously monitor and ensure appropriate levels of capital appropriate to the risks faced by the company.
Company has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:  Compliance with the requirements of the State Insurance Supervision Service of Georgia (hereinafter "Supervision Service");  Ensuring the composition and structure of assets received to cover overdue insurance liabilities and exceeding regulatory requirements; and  Ensuring the required level of company stability to ensure the quality of the policyholder safety.
The Company's interest is to provide adequate capital resources at any time and to comply with the requirements of relevant nominal regulatory capital.

The company has traditionally been a very good source of capital.

Maintaining this good capital base is also important for the future goals of the company to increase profitability and to mitigate the effects of major loss events.
Part of capital monitoring and management is the company's investment and risk management strategy, which focuses on maintaining a minimum level of funds held by leading Georgian banks.

Asset structure controls are also carried out by monthly reports prepared and sent to the founders, containing relevant calculations audited by the Company's financial director.

Regulatory requirements:  The insurance sector in Georgia is regulated by the Insurance State Supervision Service of Georgia (“ISSSG”).
The ISSSG imposes minimum capital requirements for insurance companies.

These requirements are put in place to ensure sufficient solvency margins.

 According to the ISSSG directive №27, issued on 25 December 2017, the minimum capital from 31 December 2018 throughout the period should be not less than GEL 4,200 (in thousands) and the Company should, at all times, maintain total of this amount in either cash and cash equivalents or in bank balances.
Order of the Head of the State Insurance Supervision Service of Georgia According to №45, the minimum amount of own capital at all stages of the insurance activity must be: a) Life insurance: 7,200 GEL - from December 31, 2021; B) Insurance (non-life) - except for compulsory liability insurance, liability insurance and credit liability insurance: GEL 4,800 - from 31 December 2021, c) Insurance (non-life) - compulsory liability insurance, liability insurance and liability insurance Including: 7,200 GEL - from December 31, 2021 and d) Reinsurance: 7,200 GEL - from 31 December 2021.
The amount should be placed in the form of cash, other cash equivalents and cash placed in banks.

 The company makes certain adjustments to the IFRS equity in these statements of financial position in order to arrive to the ISSSG prescribed capital.

 The Company manages its capital requirements by preventing shortfalls between reported and required capital levels on a regular basis.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid or inject further capital.

The Company was in compliance with the externally imposed capital requirements at the end of the reporting period and no changes were made to its objectives, policies and processes from the previous year for managing capital.

The Regulatory Capital should be at least either RSM or GEL 4,200 (in thousands) throughout the period from 31 January 2018.
The regulatory capital should not be less than GEL 7,200 throughout the period from 31 December, 2021.

25 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 26.

Capital risk management (Continued) The Regulatory Capital is determined based on the IFRS equity, adjusted for, for example, investments in subsidiaries and associates, unsecured loans and borrowings, etc.

as prescribed by the ISSSG directive №16.


As at 31 December 2020 and 2019 these financial statements were authorized for issue, the Company was in compliance with the level of Regulatory Capital in excess of to RSM.

27.
27.

Contingent liabilities and unforeseen circumstances Tax legislation The taxation system in Georgia is relatively new and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are sometimes unclear, contradictory and subject to varying interpretation.

A tax year remains open for review by the tax authorities during the three subsequent calendar years, however under certain circumstances a tax year may remain open longer.
These circumstances may create tax risks in Georgia that are more significant than in other countries with more developed taxation systems.

Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Georgian tax legislation, official pronouncements and court decisions.
However, the interpretations of the relevant authorities could differ and the effect on these financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

28.

Related party balances and transactions In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.
In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Related parties or transactions with related parties, as defined by IAS 24 “Related party disclosures”, represent: (a) Associates – enterprises on which the Company has significant influence and which is neither a subsidiary nor a joint venture of the investor; (b) Joint ventures in which the Company is a venture; (c) Members of key management personnel of the Company or its parent; (d) Close members of the family of any individuals referred to in (a) or (d); (e) Parties that are entities controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or (f)Post-employment benefit plans for the benefit of employees of the Company, or of any entity that is a related party of the Company.
As of December 31, 2020 and 2019, no balances with related parties and transactions with related parties are presented below: Balances with related parties Relationship Loans issued Insurance contracts liabilities Insurance receivable Total Entities under common control Entities under common control Entities under common control 31 December 2020 31 December 2019 5,251 444 282 5,977 4,758 394 294 5,446 26 JSC Insurance Company TAO Notes to the Financial Statements For the year ended 31 December 2020 (In thousands of Georgian Lari) 24.
Related party balances and transactions (continued) Transactions with related parties Relationship 2020 2019 Gross benefits and claims paid Change in outstanding claims Net claims Entities under common control Entities under common control Net premiums Change in UPR Net earned premiums Entities under common control Entities under common control Net interest income Entities under common control Key management personnel Salaries and other employee benefits 29.
Events after reporting period 616 (62) 554 440 (10) 430 403 2020 7 607 36 643 461 69 530 405 2019 112 There were no additional significant events after the reporting date that need to be presented in the financial statements.

27