# EDGAR Filing Document

**Accession Number:** 0001263043
**File Stem:** 0000950170-23-006103
**Filing Date:** 2023-3
**Character Count:** 306366
**Document Hash:** cd0417b1c5374d5678b7542869fbff91
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-006103.hdr.sgml**: 20230306

**ACCESSION NUMBER**: 0000950170-23-006103

**CONFORMED SUBMISSION TYPE**: 6-K

**PUBLIC DOCUMENT COUNT**: 5

**CONFORMED PERIOD OF REPORT**: 20230306

**FILED AS OF DATE**: 20230306

**DATE AS OF CHANGE**: 20230306

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SHINHAN FINANCIAL GROUP CO LTD
- **CENTRAL INDEX KEY:** 0001263043
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATIONAL COMMERCIAL BANKS [6021]
- **IRS NUMBER:** 000000000

**FILING VALUES:**
- **FORM TYPE:** 6-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-31798
- **FILM NUMBER:** 23707485

**BUSINESS ADDRESS:**
- **STREET 1:** 120 2-GA TAEPYUNG RO JUNG GU
- **CITY:** SEOUL100-102
- **STATE:** M5
- **ZIP:** 00000
- **BUSINESS PHONE:** 82263603000

**MAIL ADDRESS:**
- **STREET 1:** 120 2-GA TAEPYUNG RO JUNG GU
- **STREET 2:** SEOUL 100-102
- **CITY:** SEOUL
- **STATE:** M5
- **ZIP:** 00000

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**FORM 6-K**

**REPORT OF FOREIGN PRIVATE ISSUER**

**Pursuant to Rule 13a-16 or 15d-16**

**Under the Securities Exchange Act of 1934**

**For the Month of March 2023**

**SHINHAN FINANCIAL GROUP CO., LTD.**

**(Translation of registrant's name into English)**

**20, Sejong-daero 9-gil, Jung-gu, Seoul 04513, Korea <br>(Address of principal executive offices)**

Indicate by check mark whether the registrant files or will

file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F √ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in

paper as permitted by Regulation S-T Rule 101(b)(1): _______

Indicate by check mark if the registrant is submitting the Form 6-K in

paper as permitted by Regulation S-T Rule 101(b)(7): _______

Indicate by check mark whether the registrant by furnishing the

information contained in this form is also thereby furnishing the

information to the Commission pursuant to Rule 12g3-2(b) under the

Securities Exchange Act of 1934.

Yes No___√___

If "Yes" is marked, indicate below the file number assigned to the

registrant in connection with Rule 12g3-2(b): 82- <u>n/a</u> .

------

Please refer to Exhibit 99.1 and 99.2

------

**EXHIBIT INDEX**

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Exhibit No.** | &nbsp;&nbsp;**Description** |
| &nbsp;&nbsp;99.1 | &nbsp;&nbsp;Independent Auditor's Report (Separate Financial Statements) of Shinhan Life as of December 31, 2022 |
| &nbsp;&nbsp;99.2  | &nbsp;&nbsp;Independent Auditor's Report (Consolidated Financial Statements) of Shinhan Life as of December 31, 2022 |

---

------

**SIGNATURES** 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | Shinhan Financial Group Co., Ltd. | Shinhan Financial Group Co., Ltd. |
|  | (Registrant) | (Registrant) |
| &nbsp;&nbsp;&nbsp;&nbsp;Date: March 6, 2023 | By: | /s/ Lee TaeKyung |
|  | Name: Lee TaeKyung | Name: Lee TaeKyung |
|  | Title: Chief Financial Officer | Title: Chief Financial Officer |

---

------

## Ex-99

**Exhibit 99.1<br>Independent Auditor's Report (Separate Financial Statements) of Shinhan Life as of December 31, 2022**

On March 6, 2023, Shinhan Life, our wholly-owned life insurance subsidiary, filed its audit report with the Financial Supervisory Service and the Korea Exchange of the Republic of Korea pursuant to the Act of External Audit of Stock Companies and KOSPI Market Disclosure Regulation.

**Please refer to the attached PDF file to see more details of Audit Reports with separate financial statements.**

------

## Ex-99

**Exhibit 99.2<br>Independent Auditor's Report (Consolidated Financial Statements) of Shinhan Life as of December 31, 2022**

On March 6, 2023, Shinhan Life, our wholly-owned life insurance subsidiary, filed its audit report with the Financial Supervisory Service and the Korea Exchange of the Republic of Korea pursuant to the Act of External Audit of Stock Companies and KOSPI Market Disclosure Regulation.

**Please refer to the attached PDF file to see more details of Audit Reports with consolidated financial statements.**

------

### Attached PDF Documents

**Attachment 1:** `ck0001263043-ex99_1.pdf`

**SHINHAN LIFE INSURANCE CO., LTD.**

**Separate Financial Statements**

**December 31, 2022 and 2021**

**(With Independent Auditor’s Report Thereon)**

# Contents

|  | Page |
| --- | --- |
| Independent Auditor's Report | 1 |
| Separate Statements of Financial Position | 4 |
| Separate Statements of Comprehensive Income | 6 |
| Separate Statements of Changes in Equity | 8 |
| Separate Statements of Cash Flows | 10 |
| Notes to the Separate Financial Statements | 12 |
| Report on Independent Auditor's Review of Internal Control over Financial Reporting | 172 |
| Internal Control over Financial Reporting Operating Status Report | 173 |

![img-0.jpeg](img-0.jpeg)

## **Independent Auditor’s Report**

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of Shinhan Life Insurance Co., Ltd.

### **Opinion**

We have audited the accompanying separate financial statements of Shinhan Life Insurance Co., Ltd. (the Company), which comprise the separate statements of financial position as at December 31, 2022 and 2021, and the separate statements of comprehensive income, separate statements of changes in equity and separate statements of cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of Shinhan Life Insurance Co., Ltd. as at December 31, 2022 and 2021, and its separate financial performance and its separate cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).

### **Basis for Opinion**

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the separate Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the separate financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

### **Other Matter**

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and applied in other countries.

Samil PricewaterhouseCoopers, 100 Hangang-daero, Yongsan-gu, Seoul 04386, Korea, www.samil.com

## **Responsibilities of Management and Those Charged with Governance for the separate Financial Statements**

Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate 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.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

## **Auditor's Responsibilities for the Audit of the separate Financial Statements**

Our objectives are to obtain reasonable assurance about whether the separate 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 Korean Standards on Auditing 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 separate financial statements.

As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the separate 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 entity'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 separate 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 separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

2

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.

Samil PricewaterhouseCoopers

Seoul, Korea

March 6, 2023

This report is effective as of March 6, 2023, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

3

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Financial Position**  
 As of December 31, 2022 and 2021

*(In millions of won)*

|  | Note | 2022 | 2021 |
| --- | --- | --- | --- |
| Assets |  |  |  |
| Cash and due from banks at amortized cost | 4,7,8,10,50, 53 |  |  |
| Cash and cash equivalents |  | W 351,578 | 1,023,277 |
| Due from banks at amortized cost |  | 590,990 | 553,833 |
| Financial assets at fair value through profit or loss | 4,7,8,11 | 6,713,923 | 6,654,213 |
| Securities at fair value through other comprehensive income | 4,7,8,12,24, 50 | 10,902,099 | 14,282,949 |
| Securities at amortized cost | 4,7,8,13,24 | 27,744,212 | 26,806,395 |
| Investments in subsidiaries and associates | 14 | 265,493 | 212,311 |
| Loans and receivables at amortized cost | 4,7,8,15,50 |  |  |
| Loans |  | 8,612,409 | 8,610,367 |
| Receivables |  | 1,071,865 | 980,977 |
| Right-of-use assets | 16,50 | 113,158 | 135,759 |
| Property and equipment, net | 17,50 | 81,416 | 93,723 |
| Intangible assets | 18,50 | 269,300 | 214,652 |
| Deferred acquisition costs | 21 | 987,262 | 1,037,780 |
| Derivative assets | 4,7,8,22,50 | 91,937 | 5,888 |
| Current tax assets | 48 | 115,449 | 47,502 |
| Deferred tax assets | 48 | 134,309 | - |
| Investment property | 20,24 | 14,610 | 14,822 |
| Net defined benefit assets | 31 | 44,888 | 32,751 |
| Other assets | 23 | 306,757 | 58,491 |
| Separate account assets | 52 | 8,248,962 | 9,690,016 |
| Total assets |  | W 66,660,617 | 70,455,706 |

4

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Financial Position (Continued)**  
 As of December 31, 2022 and 2021

*(In millions of won)*

|  | Note | 2022 | 2021 |
| --- | --- | --- | --- |
| Liabilities |  |  |  |
| Liabilities under insurance contracts | 25 | ₩ 53,368,390 | 53,378,791 |
| Policyholders’ equity adjustments | 27 | (1,616) | 4,350 |
| Derivative liabilities | 4,7,8,22,50 | 315,420 | 141,146 |
| Borrowings | 4,7,8,28 | 10,000 | - |
| Debentures | 4,7,8,29 | 643,451 | 614,645 |
| Other financial liabilities | 4,7,8,30,35,50 | 400,229 | 344,309 |
| Lease liabilities | 4,7,8,16,20 | 109,060 | 127,406 |
| Provisions | 32 | 82,718 | 91,824 |
| Deferred tax liabilities | 48 | - | 466,097 |
| Other liabilities | 33 | 69,611 | 102,712 |
| Separate account liabilities | 52 | 8,167,178 | 10,023,775 |
| Total liabilities |  | 63,164,441 | 65,295,055 |
| Equity |  |  |  |
| Capital stock | 34 | 578,274 | 578,274 |
| Hybrid bonds | 34 | 299,452 | 299,452 |
| Capital surplus | 34 | 820,023 | 2,233,525 |
| Capital adjustments | 34 | 1,464 | 1,458 |
| Accumulated other comprehensive income(loss) | 34 | (2,072,225) | 51,927 |
| Retained earnings | 34 | 3,869,188 | 1,996,015 |
| Total equity |  | 3,496,176 | 5,160,651 |
| Total liabilities and equity |  | ₩ 66,660,617 | 70,455,706 |

*See accompanying notes to the separate financial statements.*

5

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Comprehensive Income**  
 For the years ended December 31, 2022 and 2021

*(In millions of won)*

|  | Note | 2022 | 2021 |
| --- | --- | --- | --- |
| Premium income | 36 | ₩ 6,223,203 | 4,896,083 |
| Reinsurance income | 38 | 179,797 | 87,889 |
| Interest income | 41,50 |  |  |
| Financial assets at fair value through profit or loss |  | 33,129 | 26,908 |
| Financial assets at fair value through other comprehensive income and at amortized cost |  | 1,635,239 | 1,199,168 |
| Gains on financial assets at fair value through profit or loss | 11,50 | 416,934 | 326,483 |
| Gains on financial assets at fair value through profit or loss (overlay approach) | 11 | (48,266) | (97,802) |
| Gains on disposal of securities at fair value through other comprehensive income | 12 | 72,748 | 37,744 |
| Reversal of provision for credit loss allowance | 42 | 2,938 | 688 |
| Gains on foreign currency transaction | 43 | 218,511 | 260,688 |
| Fees and commission income | 44,50 | 10,786 | 6,924 |
| Dividend income | 45 | 7,503 | 7,146 |
| Separate account commissions received |  | 223,240 | 157,314 |
| Separate account revenue | 52 | 107,393 | 72,927 |
| Gains on derivative transactions | 22,50 | 108,782 | 21,904 |
| Other income | 46 | 16,436 | 4,297 |
| Operating income |  | 9,208,373 | 7,008,361 |
| Provision for insurance contract liabilities | 25,38 | (258,971) | 786,982 |
| Claims and surrenders | 37 | 6,465,225 | 4,213,328 |
| Reinsurance expenses | 38 | 444,223 | 101,864 |
| Insurance operating expenses | 39,50 | 800,542 | 732,562 |
| Amortization of acquisition costs | 21 | 454,506 | 398,080 |
| Investment administrative expenses | 40,50 | 35,307 | 29,969 |
| Interest expenses | 41 | 36,977 | 31,491 |
| Losses on financial assets at fair value through profit or loss | 11 | 389,332 | 140,699 |
| Losses on financial assets at fair value through profit or loss (overlay approach) | 11 | (362,670) | (120,200) |
| Losses on disposal of securities at fair value through other comprehensive income | 12 | 22,692 | 5,182 |
| Losses on redemption of securities at amortized cost | 13 | 5 | 9 |
| Provision for credit loss allowance | 42 | 17,835 | 20,000 |
| Losses on foreign currency transaction | 43 | 102,808 | 52,949 |
| Amortization of intangible assets | 18 | 55,189 | 30,166 |
| Separate account commissions paid |  | 72,547 | 13,593 |
| Separate account expenses | 52 | 107,393 | 72,927 |
| Losses on derivative transactions | 22,50 | 200,200 | 224,884 |
| Other expenses | 46 | 4,464 | 1,925 |
| Operating expenses |  | ₩ 8,587,604 | 6,736,410 |

6

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Comprehensive Income (Continued)**  
 For the years ended December 31, 2022 and 2021

*(In millions of won)*

|  | Note | 2022 | 2021 |
| --- | --- | --- | --- |
| Operating profit |  | ₩ 620,769 | 271,951 |
| Non-operating income | 47 | 2,540 | 8,664 |
| Non-operating expenses | 47 | 24,350 | 35,550 |
| Profit before income taxes |  | ₩ 598,959 | 245,065 |
| Income tax expense | 48 | 128,488 | 63,418 |
| Profit for the year |  | ₩ 470,471 | 181,647 |
| Other comprehensive loss for the year, net of income tax | 9,22,34,52 |  |  |
| Items that may be subsequently reclassified to profit or loss: |  |  |  |
| Losses on financial assets measured at fair value through profit or loss (overlay approach) |  | (217,181) | (13,555) |
| Losses on valuation of securities at fair value through other comprehensive income |  | (1,707,216) | (294,564) |
| Gains (Losses) on valuation of derivatives intended for cash flow hedges |  | (98,782) | 2,487 |
| Other comprehensive losses of separate account |  | (113,207) | (39,560) |
|  |  | (2,136,386) | (345,192) |
| Items that will not be reclassified to profit or loss: |  |  |  |
| Losses on valuation of securities at fair value through other comprehensive income |  | (3,319) | (1,958) |
| Remeasurements of the defined benefit liability |  | 15,553 | 3,111 |
|  |  | 12,234 | 1,153 |
| Total other comprehensive loss, net of income tax |  | (2,124,152) | (344,039) |
| Total comprehensive loss for the year |  | ₩ (1,653,681) | (162,392) |
| Earnings per share: | 51 |  |  |
| Basic and diluted earnings per share in won |  | ₩ 3,975 | 2,186 |

*See accompanying notes to the separate financial statements.*

7

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Changes in Equity**  
 For the years ended December 31, 2022 and 2021

(In millions of won)

Equity attributable to equity holders of Shinhan Life Insurance Co., Ltd.

|  | Capital stock | Hybrid bonds | Capital surplus | Capital adjustments | Accumulated other comprehensive income (loss) | Retained earnings | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at January 1, 2021 | ₩ 200,000 | 299,452 | 19 | 1,695 | 177,427 | 1,875,168 | 2,553,761 |
| Total comprehensive income for the year: |  |  |  |  |  |  |  |
| Profit for the year | - | - | - | - | - | 181,647 | 181,647 |
| Other comprehensive income, net of income tax: |  |  |  |  |  |  |  |
| Losses on financial assets at fair value through profit or loss (overlay approach) | - | - | - | - | (13,556) | - | (13,556) |
| Losses on valuation of securities at fair value through other comprehensive income | - | - | - | - | (296,523) | - | (296,523) |
| Gains on valuation of derivatives intended for cash flow hedges | - | - | - | - | 2,487 | - | 2,487 |
| Other comprehensive loss of separate account | - | - | - | - | (39,559) | - | (39,559) |
| Remeasurement of defined benefit plans | - | - | - | - | 3,112 | - | 3,112 |
| Total other comprehensive income | - | - | - | - | (344,039) | - | (344,039) |
| Total comprehensive income | - | - | - | - | (344,039) | 181,647 | (162,392) |
| Other changes in equity |  |  |  |  |  |  |  |
| Dividends | - | - | - | - | - | (50,000) | (50,000) |
| Share-based payment | - | - | - | (237) | - | - | (237) |
| Interest payment on hybrid bonds | - | - | - | - | - | (10,800) | (10,800) |
| Other changes due to merger and acquisition | 378,274 | - | 2,233,506 | - | 218,539 | - | 2,830,319 |
| Balance at December 31, 2021 | ₩ 578,274 | 299,452 | 2,233,525 | 1,458 | 51,927 | 1,996,015 | 5,160,651 |

8

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Changes in Equity (Continued)**  
 For the years ended December 31, 2022 and 2021

(In millions of won)

Equity attributable to equity holders of Shinhan Life Insurance Co., Ltd.

|  | Capital stock | Hybrid bonds | Capital surplus | Capital adjustments | Accumulated other comprehensive income (loss) | Retained earnings | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at January 1, 2022 | ₩ 578,274 | 299,452 | 2,233,525 | 1,458 | 51,927 | 1,996,015 | 5,160,651 |
| Total comprehensive income for the year: |  |  |  |  |  |  |  |
| Profit for the year | - | - | - | - | - | 470,471 | 470,471 |
| Other comprehensive income, net of income tax: |  |  |  |  |  |  |  |
| Losses on financial assets at fair value through profit or loss (overlay approach) | - | - | - | - | (217,181) | - | (217,181) |
| Losses on valuation of securities at fair value through other comprehensive income | - | - | - | - | (1,710,535) | - | (1,710,535) |
| Losses on valuation of derivatives intended for cash flow hedges | - | - | - | - | (98,782) | - | (98,782) |
| Other comprehensive loss of separate account | - | - | - | - | (113,207) | - | (113,207) |
| Remeasurement of defined benefit plans | - | - | - | - | 15,553 | - | 15,553 |
| Total other comprehensive income | - | - | - | - | (2,124,152) | - | (2,124,152) |
| Total comprehensive income | - | - | - | - | (2,124,152) | 470,471 | (1,653,681) |
| Other changes in equity |  |  |  |  |  |  |  |
| Share-based payment | - | - | - | 6 | - | - | 6 |
| Interest payment on hybrid bonds | - | - | - | - | - | (10,800) | (10,800) |
| Reduction of capital surplus, increase of retained earnings | - | - | (1,413,502) | - | - | 1,413,502 | - |
| Balance at December 31, 2022 | ₩ 578,274 | 299,452 | 820,023 | 1,464 | (2,072,225) | 3,869,188 | 3,496,176 |

See accompanying notes to the separate financial statements.

9

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Cash Flows**  
 For the years ended December 31, 2022 and 2021

*(In millions of won)*

|  | 2022 | 2021 |
| --- | --- | --- |
| Cash flows from operating activities |  |  |
| Profit before income taxes | ₩ 598,959 | 245,065 |
| Adjustments for: |  |  |
| Interest income | (1,668,368) | (1,226,076) |
| Interest expense | 36,977 | 31,492 |
| Dividend income | (7,503) | (7,146) |
|  | (1,638,894) | (1,201,730) |
| Gain or losses with no cash inflows or outflows: |  |  |
| Amortization of acquisition costs | 454,506 | 398,080 |
| Gain on financial assets at fair value through profit or loss | (157,010) | (130,036) |
| Gain on financial assets at fair value through profit or loss (overlay approach) | 48,266 | 97,802 |
| Loss on financial assets at fair value through profit or loss | 384,448 | 138,041 |
| Loss on financial assets at fair value through profit or loss (overlay approach) | (362,670) | (120,200) |
| Gain on disposal of securities at fair value through other comprehensive income | (72,748) | (37,744) |
| Loss on disposal of securities at fair value through other comprehensive income | 22,692 | 5,182 |
| Loss on redemption of securities at amortized cost | 5 | 9 |
| Provision for credit loss allowance | 14,897 | 19,312 |
| Gain on derivative transactions | (14,663) | (6,461) |
| Loss on derivative transactions | 109,310 | 96,564 |
| Gain on valuation of derivatives | (88,892) | (11,369) |
| Loss on valuation of derivatives | 88,561 | 126,451 |
| Gain on foreign currency translation | (171,705) | (208,913) |
| Loss on foreign currency translation | 84,684 | 42,498 |
| Gain on foreign currency transaction | (4,022) | (29,669) |
| (Reversal of) Provision for insurance contract liabilities | (258,971) | 786,982 |
| Amortization of right-of-use assets | 37,514 | 25,426 |
| Depreciation | 18,992 | 15,508 |
| Amortization of intangible assets | 55,189 | 30,166 |
| Employee costs | 17,763 | 11,104 |
| Rental income | (25) | (18) |
| Losses (gains) on provisions | (1,770) | 22,084 |
| Other operating income | - | (1,816) |
| Other non-operating income | (685) | (2,581) |
| Other non-operating expense | 2,739 | 9,765 |
|  | 206,405 | 1,276,167 |
| Changes in assets and liabilities: |  |  |
| Due from banks at amortized cost | (37,276) | 82,444 |
| Financial assets at fair value through profit or loss | (189,790) | (194,400) |
| Loans at amortized cost | (6,964) | 348,291 |
| Receivables at amortized cost | (103,335) | (30,630) |
| Deferred acquisition costs | (403,988) | (307,160) |
| Other assets | 305 | (3,677) |
| Separate account assets | 1,327,846 | 67,488 |
| Liabilities for defined benefit obligations | (6,842) | (30,334) |
| Provisions | (8,248) | (5,323) |
| Derivative liabilities | (13,180) | (3,732) |

10

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Separate Statements of Cash Flows (Continued)**  
 For the years ended December 31, 2022 and 2021

*(In millions of won)*

|  | 2022 | 2021 |
| --- | --- | --- |
| Other financial liabilities | ₩ 70,262 | (81,404) |
| Other liabilities | (33,115) | (11,538) |
| Separate account liabilities | (1,856,598) | (534,432) |
| Income taxes paid | (71,758) | (76,605) |
| Interest received | 1,299,433 | 985,742 |
| Interest paid | (34,187) | (31,591) |
| Dividends received | 7,507 | 4,577 |
| Net cash inflow(outflow) from operating activities | (893,458) | 497,218 |
| Cash flows from investing activities |  |  |
| Proceeds from disposal of financial assets at fair value through profit or loss | 963,044 | 768,381 |
| Acquisition of financial assets at fair value through profit or loss | (1,004,587) | (844,722) |
| Proceeds from disposal of securities at fair value through other comprehensive income | 3,123,021 | 1,885,260 |
| Acquisition of securities at fair value through other comprehensive income | (1,959,954) | (810,690) |
| Decrease in securities at amortized cost | 258,665 | 258,983 |
| Acquisition of securities at amortized cost | (822,720) | (1,448,888) |
| Acquisition of investments in subsidiaries | (20,000) | (189,144) |
| Proceeds from disposal of investments in associates | 2,456 | - |
| Acquisition of investments in associates | (35,981) | (1,055) |
| Proceeds from settlement of hedging derivative financial instruments | 12,197 | 54,679 |
| Settlement of hedging derivative financial instruments | (138,834) | (51,977) |
| Proceeds from disposal of property and equipment | 369 | 446 |
| Acquisition of property and equipment | (10,115) | (23,772) |
| Proceeds from disposal of intangible assets | 682 | 1,617 |
| Acquisition of intangible assets | (123,083) | (88,580) |
| Decrease in receivables at amortized cost | 30,214 | 13,078 |
| Increase in receivables at amortized cost | (19,722) | (17,271) |
| Net cash flow from business combination | - | 485,943 |
| Net cash inflow(outflow) from investing activities | 255,652 | (7,712) |
| Cash flows from financing activities |  |  |
| Increase in borrowings | 10,000 | - |
| Decrease in other financial liabilities | (289) | (539) |
| Increase in other financial liabilities | 194 | 2,041 |
| Decrease in lease liabilities | (34,360) | (23,926) |
| Dividends paid | - | (50,000) |
| Hybrid bond interests paid | (10,800) | (10,800) |
| Net cash inflow(outflow) from financing activities | (35,255) | (83,224) |
| Net increase(decrease) in cash and cash equivalents | (673,061) | 406,282 |
| Changes in cash and cash equivalents due to foreign currency translation | 1,362 | 1,490 |
| Cash and cash equivalents at the beginning of year | 1,023,277 | 615,505 |
| Cash and cash equivalents at the end of year | ₩ 351,578 | 1,023,277 |

*See accompanying notes to the separate financial statement*

11

# **SHINHAN LIFE INSURANCE CO., LTD.**
**Notes to the Separate Financial Statements**
December 31, 2022 and 2021

# **1. Reporting entity**

Shinhan Life Insurance Co., Ltd., (the “Company”) was established in January, 1990, which is located at 358 Samil-daero, Jung-gu, Seoul and operates the life insurance business. Company operates through 217 domestic branches and 1 overseas branch, and Shinhan Financial Group owns 100% of the Company’s stock. Meanwhile, the Company has merged with Orange Life Insurance Co., Ltd. on July 1, 2021 in accordance with the resolution of the general shareholders’ meeting on December 23, 2020, and has changed its name to Shinhan Life Insurance Co., Ltd.

# **2. Basis of preparation**

# **(a) Statement of compliance**

The accompanying separate financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”), as prescribed in *the Article 5(1)1 Act on External Audits of Corporations in the Republic of Korea*.

The separate financial statements are prepared in accordance with Korean IFRS 1027 ‘*Separate Financial Statements*’ in which presented based on direct equity investments, not on that the controlling company, equity interests in associates and joint ventures does not base the investment on the investee’s reported performance and net assets.

# **(b) Approval date for issuance of the consolidated financial statements**

The separate financial statements of the company were authorized for issue by the Board of Directors on February 7, 2023, and the separate financial statements will be submitted for the final approval to the stockholder’s meeting on March 22, 2023.

# **(c) Basis of measurement**

The separate financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position:

- derivative financial instruments measured at fair value
- financial instruments at fair value through profit or loss measured at fair value
- financial instruments at fair value through other comprehensive income measured at fair value
- liabilities for cash-settled share-based payment arrangements measured at fair value
- liabilities for defined benefit plans recognized at the net of the total present value of defined benefit obligations less the fair value of plan assets

# **(d) Functional and presentation currency**

The respective financial statements of the Company is prepared in the functional currency of the respective economic environment in which the Company entities operate. These separate financial statements are presented and reported in Korean won, which is the Controlling Company’s functional currency and the currency of the primary economic environment in which the Company operates.

12

# **SHINHAN LIFE INSURANCE CO., LTD.**
**Notes to the Separate Financial Statements**
December 31, 2022 and 2021

# **2. Basis of preparation (continued)**

# **(e) Use of estimates and judgements**

The preparation of the separate financial statements in conformity with Korean IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. If the estimates and assumptions based on management's best judgment as of December 31, 2022 are different from the actual environment, these estimates and actual results may be different.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

# 1 Uncertainty in assumptions and estimates

Accounting estimates and assumptions that include significant risks that may incur significant adjustments to the carrying amounts of assets and liabilities accounted for as of the end of the reporting period are as follows And are disclosed in notes 9.

- Fair value of financial instruments
- Provision for credit loss
- Impairment of financial and non-financial assets
- Liabilities for defined benefit obligations
- Liability adequacy test

# 2 Fair value measurement

The accounting policies and disclosures of the Company require fair value measurement for a number of financial and non-financial assets and liabilities, and thus, the Company establishes the fair value assessment policies and procedures. These policies and procedures involve the operation of the valuation department, which is responsible for the review of all significant fair value measurements, including fair values, which are classified as level 3 in the fair value hierarchy, and the results are reported to the chief financial officer.

The valuation department regularly reviews significant inputs and adjustments that are not observable. If the fair value measurement uses third-party information, such as broker's price or valuation agency, the valuation department determines whether an assessment based on information obtained from third parties can conclude that the fair value hierarchy includes classifications by level and meets the requirements of the related Standard.

When measuring the fair value of an asset or a liability, the Company uses as much market observable inputs as possible. Fair value is classified within the fair value hierarchy based on inputs used in valuation techniques as follows:

- Level 1: Unadjusted quoted prices in active markets accessible to the same assets or liabilities at the measurement date
- Level 2: Observable inputs, directly or indirectly, on assets or liabilities other than Level 1 quoted prices
- Level 3: Unobservable inputs to assets or liabilities

If several inputs used to measure the fair value of an asset or liability are classified at different levels within the fair value hierarchy, the Company classifies all fair value measurements at the same level as the lowest level inputs in the fair value hierarchy, and a change in the fair value hierarchy is recognized at the end of the reporting period.

Detailed information on the assumptions used in fair value measurements is included in Note 7.

13

# SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

# **2. Basis of preparation (continued)**

# **(f) Standards and amendments adopted by the Company**

The Company has newly applied the following accounting policies upon preparation of the annual separate financial statements from the financial year starting January 1, 2022.

# *i) Korean IFRS 1103 'Business combination' amended - Reference to the Conceptual Framework*

The amendments update a reference of definition of assets and liabilities to be recognized in a business combination in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of Korean IFRS 1037 'Provisions, Contingent Liabilities and Contingent Assets', and Korean IFRS 2121 'Levies'. The amendments also clarify that contingent assets should not be recognized at the acquisition date. The amendments do not have a significant impact on the separate financial statements.

# *ii) Korean IFRS 1016 'Property, and Equipment' amended - Proceeds before the intended use*

The amendments require the entity to recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss, and prohibit an entity from deducting from the cost of an item of property, and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. The amendments do not have a significant impact on the separate financial statements.

# *iii) Korean IFRS 1037 'Provisions, Contingent Liabilities and Contingent Assets' amended - Onerous Contracts: Cost of Fulfilling a Contract*

The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendments do not have a significant impact on the separate financial statements.

# *iv) Annual Improvements to Korean IFRSs 2018-2020 Cycle*

For Annual Improvements to Korean IFRSs 2018-2020 Cycle, the amendments will take effect for annual periods beginning after January 1, 2022 and are permitted for early application. The amendments do not have a significant impact on the separate financial statements.

- Korean IFRS 1101 'First-time Adoption of Korean IFRS'-First-time adopter subsidiaries
- Korean IFRS 1109 'Financial Instruments' -10% test-related fee for financial liabilities removal
- Korean IFRS 1041 'Agriculture' - Fair value measurement

14

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

3. Significant accounting policies

Except for the new standards and the amendment to the following standard, which are applied from January 1, 2022, the accounting policies applied by the Company in these separate financial statements are the same as those applied by the Company in its separate financial statements as of December 31, 2022 and 2021.

(a) Investments in subsidiaries

The accompanying separate financial statements have been prepared on a stand-alone basis in accordance with Korean IFRS 1027 Separate Financial Statements. The Company's investments in subsidiaries are recorded at cost less impairment, if any, in accordance with Korean IFRS 1027. The Company applied Korean IFRS 1109 for beneficiary certificates using fair value method. Dividends received from its subsidiaries are recognized in profit or loss when the Company is entitled to receive the dividend.

(b) Business combinations

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

In a business combination, consideration transferred is measured at fair value at the acquisition date, and identifiable assets, liabilities and contingent liabilities acquired in the business combination are initially measured at fair value at the acquisition date. Other non-controlling interests are measured at fair value unless otherwise required by the Standard. Acquisition-related costs are recognized as current expenses when incurred.

The amount recognized as goodwill is calculated as the amount by which the acquisition cost, the amount of non-controlling interests in the acquiree, and the fair value of all previously held equity interest at the acquisition date exceeds the fair value of the acquiree's identifiable net assets. If the consideration, etc., is less than the fair value of the acquired subsidiary's net assets, the difference is recognized as profit or loss.

(c) Revenue recognition criteria

The Company recognizes revenue by applying the below five-step model for revenue recognition.

1 Identification of contract
2 Identification of performance obligation
3 Calculation of transaction price
4 Allocation of transaction price to performance obligation
5 Recognition of revenue when performance obligation is fulfilled

15

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(c) Revenue recognition criteria (continued)**

# *i) Interest income and expenses*

Interest income is recognized using the effective interest method as time passes. The effective interest method is a method of calculating the amortized cost of a financial asset or financial liability and of allocating interest income or interest expense over the relevant period.

The effective interest rate is the interest rate at which the present value of future cash outflows and inflows, which are expected in the expected life of a financial instrument or, where appropriate, in the shorter period, exactly matches the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Company estimates future cash flows considering all contractual terms of the financial instrument and does not consider future credit losses. It also reflects fees, transaction costs and other premiums and discounts paid or received between the parties. In exceptional cases where the cash flows or expected lifespan of a financial instrument cannot be reliably estimated, the contractual cash flows over the entire contract period are used to calculate the effective interest rate. If a financial asset is subsequently impaired after its initial recognition, subsequent interest income is recognized using the original effective interest rate.

# *ii) Dividend income*

Dividend income is recognized when the right to receive dividends is established.

16

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

3. Significant accounting policies (continued)

(d) Foreign currency transactions

In preparing the separate financial statements, transactions in currencies other than the functional currency (foreign currency) are recorded by applying the exchange rate at the transaction date. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the closing rate at the end of the reporting period. Non-monetary foreign currency items measured at fair value are converted at the exchange rate on the day the fair value is determined, and non-monetary items measured at historical cost are converted at the exchange rate at the transaction date.

Both foreign exchange differences that occur at the time of settlement of monetary items and foreign exchange differences arising from conversion of monetary items are recognized in profit or loss. If the gain or loss arising from non-monetary items is recognized in other comprehensive income, the effect of the exchange rate fluctuation included in the gain or loss is recognized in other comprehensive income.

(e) Cash and cash equivalents

The Company classifies cash balances, call deposits and highly liquid investment assets with original maturities of three months or less from the acquisition date that are easily converted into a fixed amount of cash and are subject to an insignificant risk of changes in their fair value as cash and cash equivalents. Equity instruments are excluded from cash equivalents unless they are, in substance, cash equivalents, like in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date.

(f) Non-derivative financial assets

A financial asset is measured initially at its fair value. For assets and liabilities that are not carried at Fair Value Through Profit or Loss (“FVTPL”), transaction costs that are directly attributable to the acquisition or issue of the financial assets or liabilities are deducted from fair value. Transaction costs of the financial assets at FVTPL are recognized in profit or loss as incurred.

i) Classification and subsequent measurement

At initial recognition, financial assets are classified into debt instruments measured at amortized cost, fair value through other comprehensive income, and equity instruments measured at fair value through other comprehensive income, fair value through profit or loss.

Financial assets are not reclassified after initial recognition unless the Company changes its business model for managing financial assets, and if changes, all affected financial assets are reclassified on the first day of the first reporting period after the change in the business model.

When a financial asset meets both of the following conditions and is not designated as at fair value through profit or loss, the asset is measured at amortized cost:

- Held under a business model whose objective is to collect contractual cash flows
- Cash flows that consist solely of interest payments on principal and principal balances at a specific date, depending on the terms of the financial asset's contract.

A debt instrument shall be measured at fair value through other comprehensive income unless it meets both of the following conditions and is not designated as fair value through profit or loss:

- Retaining financial assets under a business model that is aimed at both collecting contractual cash flows and selling financial assets
- Cash flows that are solely payments of interest on interest and principal balance on a specific date according to the terms of the contract

17

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(f) Non-derivative financial assets (continued)**

# *i) Classification and subsequent measurement (continued)*

Upon initial recognition of an equity instrument that is not held for trading, the Company may make an irreversible choice that results in other comprehensive income from subsequent changes in fair value of the financial instrument. These choices are made by financial instrument.

All financial instruments that are not carried at amortized cost or other comprehensive income or fair value are measured at fair value through profit or loss, including all derivative financial assets. If a financial asset that meets the requirements of measuring amortized cost or fair value through other comprehensive income is designated as measured at fair value through profit or loss, the financial asset may be designated as at initial recognition as at fair value through profit or loss if the accounting mismatch is eliminated or significantly reduced. However, this designation cannot be cancelled.

The following accounting policy applies to subsequent measurement of financial assets.

| Financial assets at fair value through profit or loss | These assets are subsequently measured at fair value. Net profit or loss, including interest and dividend income, is recognized in profit or loss. |
| --- | --- |
| Financial assets at amortized cost | These assets are subsequently measured at amortized cost using the effective interest method. Depreciated cost is reduced by impairment loss. Interest income, foreign currency translation gains and losses shall be recognized in profit or loss. The gain or loss on derecognition is also recognized in profit or loss. |
| Debt instruments at fair value through other comprehensive income | These assets are subsequently measured at fair value. Interest income, foreign currency translation gains and losses calculated using the effective interest method shall be recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. The gain or loss accumulated in other comprehensive income upon derecognition shall be reclassified to profit or loss. |
| Equity instruments at fair value through other comprehensive income | These assets are subsequently measured at fair value. Dividends are recognized in profit or loss unless the dividends clearly represent a recovery of investment costs. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss. |

In accordance with Korean IFRS 1104, the Company has designated an overlay approach to financial assets related to insurance contracts. Under this approach, as the Company applies Korean IFRS 1109, the amount reported as profit or loss of financial assets measured at fair value through profit or loss is reclassified as the amount that would have been reported as profit or loss if Korean IFRS 1039 had been applied.

# *ii) Derecognition*

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. If the Company does not have or transfer most of the risks and rewards of ownership of the financial asset, the entity shall remove the financial asset if it does not control the financial asset.

18

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(f) Non-derivative financial assets (continued)**

# *ii) Derecognition (continued)*

If the Company transfers the right to cash flows of a financial asset but holds most of the risks and rewards of ownership of the financial asset, the entity shall continue to recognize the asset.

# *iii) Offsetting*

Financial assets and financial liabilities are offset, and the net amount is presented in the separate statement of financial position only when the Company currently has a legally enforceable right to set off the recognized amounts, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

# **(g) Non-derivative financial liabilities**

The Company categorizes financial liabilities into financial liabilities at fair value through profit or loss and other financial liabilities based on the substance of the contractual terms and the definition of financial liabilities.

# *i) Financial liabilities at fair value through profit or loss*

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or financial liabilities designated upon fair value through profit or loss upon initial recognition. Financial liabilities at fair value through profit or loss are initially measured at fair value, and changes therein are recognized in profit or loss. Transaction costs incurred in issuance at the date of initial recognition are recognized immediately in profit or loss.

# *ii) Other financial liabilities*

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities are initially measured at fair value, net of transaction costs directly attributable to issuance. Subsequently, other financial liabilities are measured at amortized cost using the effective interest method, and interest expense is recognized using the effective interest method.

The Company derecognizes a financial liability from the separate statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, canceled or expires).

If the prepayment amount represents substantially interest on unpaid principal and residual principal and includes reasonable additional compensation for prepayment of the contract, the early repayment characteristics are consistent with the terms of payment of principal and interest at a particular date.

And, for financial assets acquired by significant discounts or premiums on contractual par value, the intermediate repayment amount substantially represents contractual par value and contract accrued interest amount (but not paid) (which in this case may include reasonable additional compensation for early liquidation of the contract), and If the prepayment feature is insignificant at the time of initial recognition of a financial asset, the Company determines that this condition is met.

19

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

3. Significant accounting policies (continued)

(h) Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequently, the valuation gains or losses resulting from the fair value changes of derivatives are recognized as described below.

i) Hedge accounting

The Company holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Company designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities, or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction. In addition, this document describes the hedging instrument, hedged item, and the method of evaluating the effect of the hedging instrument offsetting changes in the fair value or cash flow of the hedged item due to the hedged risk at the initiation of the hedging relationship and in subsequent periods.

1 Fair value hedge

Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value for a derivative hedging instrument and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the separate statement of comprehensive income.

The Company discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria. Any adjustment arising from G/L on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

2 Cash flow hedge

When a derivative is designated as hedging instrument, the effective portion of changes in the fair value of the derivative is recognized as other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately as profit or loss.

ii) Other derivative instruments

All derivatives, except those designated as hedging instruments and that are effective in hedging, are measured at fair value and the gain or loss on valuation resulting from changes in fair value is recognized in profit or loss.

(i) Impairment of financial assets

The Company recognizes provision for credit loss allowance on the following assets:

- Financial assets measured at amortized cost
- Debt instruments measured at fair value through other comprehensive income

The Company measures provision for credit loss allowance at the amount equal to the expected credit loss for the entire period, except for the following financial assets that are measured as 12-month expected credit losses.

- Debt securities whose credit is determined to be low risk at the end of the reporting period
- Other debt securities that have not significantly increased their credit risk (i.e. the risk of defaulting the financial asset over its expected life) since the initial recognition

20

# SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

# 3. Significant accounting policies (continued)

# (i) Impairment of financial assets (continued)

When determining whether the credit risk of a financial asset has increased significantly since the initial recognition and when estimating expected credit losses, the Company considers information that is available, reasonable, and supportable without excessive cost or effort. This includes qualitative and quantitative information and analysis based on the Company's experience and known credit ratings, including forward-looking information.

The Company assumes that the credit risk of financial assets will increase significantly if the overdue days exceed 30 days.

The Company considers that a default on a financial asset has occurred if:

- the delinquent days of financial assets exceed 90 days
- the debtor is not likely to fulfill his credit obligations to the Company unless the Company engages in an appeal.
The longest period to consider when measuring expected credit loss is the longest contract period in which the Company is exposed to credit risk.

# i) Measurement of expected credit loss

Expected credit loss is a probability weighted estimate of credit loss. Credit loss is measured as the present value of all cash deficits (i.e., the difference between all contractual cash flows to be received under a contract and all contractual cash flows that is expected to be received).

Expected credit loss is discounted at the effective interest rate of the financial asset.

# ii) Financial assets with credits impaired

At the end of each reporting period, the Company assesses whether the assets of financial assets measured at amortized cost and other comprehensive income and fair value of debt securities measured at fair value are impaired. If one or more events that adversely affect the estimated future cash flows of a financial asset have occurred, the financial asset is impaired.

# iii) Presentation of provision for credit loss allowance in the statement of financial position

Provision for credit loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the asset. For debt instruments measured at fair value through other comprehensive income, the provision for credit loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

21

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(j) Impairment of non-financial assets**

For all non-financial assets of the Company, except those assets that are recognized in accordance with the revenue from the contract with the customer and those assets that arise from the costs of entering into or implementing the contract, the assets arising from employee benefits, deferred tax assets, amortized contract costs, reinsurance assets and non-financial assets classified as held for sale, an entity assesses the recoverable amount of the asset at the end of each reporting period. However, intangible assets with indefinite useful lives and intangible assets that are not yet available for use are tested for impairment by comparing the recoverable amount with the carrying amount each year, regardless of any indication of asset impairment.

The Company estimates the recoverable amount of an individual asset, if it is impossible to measure the individual recoverable amount of an asset, then the Company estimates the recoverable amount of cash-generating unit ('CGU'). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or the CGU.

An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

At the end of each reporting period, the Company reviews whether there are any indications that any impairment losses recognized in prior periods for assets other than goodwill are no longer present or have been reduced, and only reverses the estimates used to determine recoverable amount since the date of recognition of the immediate impairment loss. The carrying amount increased by the reversal of the impairment loss shall not exceed the balance after amortization of the carrying amount before the impairment loss was recognized in the past.

# **(k) Leases**

At the date of inception in the lease agreement, the Company determines whether the contract is a lease or includes a lease component. A contract is a lease or includes a lease component when it conveys the right to control the use of an identified asset for a period in exchange for the consideration. To determine whether a contract conveys the right to control the use of an identified asset, the Company follows the definition of a lease as defined by Korean IFRS 1116.

# *i) Accounting treatment as the lessee*

The Company evaluates whether the contract is a lease or if the contract includes leases on the contract date. The Company recognizes the right-of-use assets and corresponding lease liabilities in relation to all lease agreements except for short-term leases (less than 12 months of lease term) and low-value asset leases if the user is a lessee. The Company recognizes lease payments related to short-term leases and low-value underlying asset leases as expenses on a straight-line basis over the lease term unless other systematic criteria better represent the form of the lessee's benefits.

Lease liabilities are initially measured at the present value of lease payments that are not paid at the date of lease commencement, discounted at the implicit interest rate of the lease. If the implicit interest rate of the lease cannot be easily calculated, the lease's incremental borrowing rate is used.

22

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

3. Significant accounting policies (continued)

(k) Leases (continued)

Lease payments included in the measurement of lease liabilities consist of the following amounts:

- Fixed payments (including in substance fixed payments, less any less incentive receivables)
- Variable lease payments depending on the index or rate
- Amounts expected to be paid by the lessee under the residual value guarantee
- The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
- Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease

The Company discloses lease liabilities separately from other liabilities in the statement of financial position. Lease liabilities are subsequently measured by increasing the carrying amount (using the effective interest rate method) to reflect the interest on the lease liabilities and reducing the carrying amount to reflect the lease payments paid.

The Company remeasures lease liabilities and makes appropriate adjustments to related right-of-use assets in the following cases:

- When the lease period changes, or a change in circumstances or a significant event occurs those results in a change in the valuation of the extension option. In this case, the lease liability is measured again by discounting the revised lease payment at a revised discount rate.
- When the lease payment changes due to changes in the index or rate (interest rate) or the amount expected to be paid according to the residual value guarantee. In this case, the lease liability is measured again by discounting the revised lease payment at an unchanged discount rate. However, if the lease payment has changed due to the change in the variable interest rate, a modified discount rate is used to reflect the change in the interest rate.
- When the lease contract is changed and is not accounted for as a separate lease. In this case, the lease liability is measured again by discounting the revised lease payment to the revised discount rate as of the effective date of the lease change, based on the lease period of the changed lease.

Right-of-use assets consist of the initial measurement of the lease liability and the lease payments paid before or after the lease commencement (the lease incentive received is deducted) and initial direct costs of the lease assumed by the lessee. Right-of-use assets are subsequently measured by subtracting the accumulated depreciation from the cost and the accumulated impairment loss.

Estimates of any costs to be incurred by the Company in dismantling and removing the underlying asset, or restoring the site on which it is located, or restoring the underlying asset itself are recognized and measured in accordance with Korean IFRS 1037. If such costs are not incurred to produce inventories, the costs are recognized as part of the cost of the right-of-use asset if the cost is related to it.

If the ownership of the underlying asset is transferred to the lessee before the end of the lease term, or if the cost of the right-of-use asset reflects that the lessee will exercise the purchase option, the lessee depreciates the underlying asset from the inception of the lease to the end of its useful life. In other cases, the lessee depreciates the right-of-use asset from the commencement date of the lease to the early end of the useful life of the right-of-use asset and the end of the lease term.

The Company discloses assets separately from other assets in the statement of financial position.

The Company applies Korean IFRS 1036 to determine if a right-of-use an asset is impaired, and accounting for the impairment loss identified is described in the accounting policy for 'Impairment of non-financial assets' (see Note 3. (j)).

23

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(k) Leases (continued)**

The Company does not include variable lease payments (except for variable lease payments that vary depending on the index or rate (interest rate)) in the measurement of right-of-use assets and lease liabilities, and the lease payments are recognized in profit or loss during the period in which the event or condition that triggers the variable lease occurs.

As a practical expedient, the lessee can choose by type of underlying asset to account for each lease element and the associated non-lease element as a single lease element without separating it from the lease component, and the Company does not use this practical expedient. In a contract that includes one lease element and one or more additional lease elements or non-leases, the lessee allocates the contract price to each lease element based on the relative individual price of the lease element and the total individual price of the non-lease component.

The Company determines the lease term within the non-cancelable period of the lease, including the period for which the lessee is reasonably certain of exercising renewal option and the periods for which the lessee is reasonably certain it will not exercise the termination option. The Company determines the non-cancelable period of the lease considering the significance of economic disadvantages when terminating a contract when the lessee and the lessor each have the right to terminate the lease without permission from the other party.

# *ii) Accounting treatment as the lessor*

The Company classifies each lease as an operating lease or finance lease. Leases that transfer most of the risks and rewards of ownership of the underlying asset are classified as finance leases and those that do not transfer most of the risks and rewards of ownership of the underlying asset are classified as operating leases.

Where the Company is an intermediate lease provider, the Company accounts for the upper lease and the former lease as two separate contracts. The Company classifies the entire lease as a finance lease or operating lease depending on the right-of-use assets generated from the upper lease rather than the underlying asset.

The Company recognizes operating lease fees as revenue on a straight-line method or other systematic basis. If another systematic basis better represents the form of decrease in the efficiency of underlying assets due to its usage, the Company shall recognize lease using that method.

The Company recognizes initial direct costs the lease incurred in the process of entering an operating lease in addition to the carrying amount of the underlying asset and as an expense over the lease term on the same basis as the lease payments.

If the contract includes lease and non-lease components, the Company applies Korean IFRS 1115 to allocate the consideration to each component.

24

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(l) Property, and equipment**

Property, and equipment is initially measured and recognized at cost, and the cost of property, and equipment includes costs directly related to the location and condition required to operate the asset in the manner intended by management, and costs estimated to be incurred to dismantle, remove, or restore the site. However, some land and buildings of property, and equipment are measured at fair value at the date of transition by applying Korean IFRS 1101 ‘First-time Adoption of International Financial Reporting Standards’.

After the initial recognition, property, and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. The cost incurred in substituting some of the property, and equipment is likely to flow into the Company from future economic benefits from the asset, and, when the cost can be measured reliably, it is included in the carrying amount of the asset or recognized as a separate asset where appropriate. The carrying amount of the replaced part is derecognized. Costs incurred in other ordinary repairs or maintenance are recognized in profit or loss as incurred.

Land, among other property, and equipment is not depreciated, and other property, and equipment are the expected form of consumption of future economic benefits inherent in the asset over its useful life, as set forth below, in the amount of the asset’s acquisition cost less its residual value. Amortized using the straight-line method that best reflects.

The estimated useful life for the years ended December 31, 2022 and 2021, are as follows:

| Classification | Expected useful life |
| --- | --- |
| Building | 50 years |
| Structure | 20 years |
| Rental property | 5 years or rental period |
| Vehicle | 5 years |
| Tools | 5 years |

At the end of each reporting period, the Company reviews the residual value, useful life, and depreciation method of the asset and treats it as a change in accounting estimate if it is appropriate to change it.

# **(m) Intangible assets**

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets as shown below, from the date that they are available for use. The residual value of intangible assets is zero. However, if there are no foreseeable limits to the periods over which certain intangible assets are expected to be available for use, they are determined to have indefinite useful lives and are not amortized.

| Classification | Expected useful life |
| --- | --- |
| Development cost | 5 years |
| Software | 5 years |
| License | 10 years |

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.

25

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(n) Investment properties**

Property held for the purpose of obtaining rental income, market profit or both is classified as investment property. Investment property is measured initially at its cost including transaction costs incurred in acquiring the asset. After recognition as an asset, investment property is carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are likely to result in an inflow of future economic benefits from an asset and are included in the carrying amount of the asset or, where appropriate, recognized as separate assets, and the carrying amount of the replaced part of the subsequent expenditure is removed. On the other hand, the costs incurred in relation to routine repairs and maintenance are recognized in profit or loss when incurred.

Land held for investment is not depreciated. Investment property, except for land, is depreciated using straight-line method over their useful lives of 50 years.

The depreciation method, residual value and useful life of the investment property is reviewed at the end of each reporting period and is accounted for as changes in accounting estimates if it is reasonable to change.

# **(o) Assets held for sale**

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell. The Company recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.

An asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

26

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(p) Employee benefits**

# *i) Short-term employee benefits*

Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

# *ii) Retirement benefits*

# 1 Defined contribution plans

When a service is provided by an employee for a certain period in relation to the defined contribution plan, the contribution to be paid in the defined contribution plan in exchange for the service is recognized in profit or loss, except when included in the cost of the asset. Contributions to be paid are recognized as a liability (accrued expenses) after deducting contributions. If the contributions already paid out exceed the contributions due for service provided prior to the end of the reporting period, the amount of future payments or cash refunds due to the excess contributions is recognized as assets (prepaid expenses).

# 2 Defined benefit plans

For the year ended December 31, 2022, defined benefit liabilities related to the defined benefit plan are recognized by deducting the fair value of external reserve from the present value of the defined benefit plan debt.

The defined benefit liability is calculated by an independent actuary every year. If the net amount calculated by deducting the fair value of the plan assets from the present value of the defined benefit obligation is an asset, the asset is recognized up to the limit of the present value of the economic benefits available in such a way as to receive a refund from the plan or to reduce future contributions to the plan.

The remeasurement component of the net defined benefit liability consists of changes in the asset ceiling effect excluding actuarial gains and losses, revenues from plan assets, and amounts included in the net interest of the net defined benefit liability and is immediately recognized in other comprehensive income. The Company determines the net interest of the net defined benefit liability (asset) by multiplying the net defined benefit liability (asset) by the discount rate determined at the beginning of the annual reporting period and considering changes in the net defined benefit liability (asset) due to contributions and payout during the reporting period. Net interest and other expenses related to the defined benefit plan are recognized in profit or loss.

When an amendment or reduction of the system occurs, the gain or loss resulting from the change or decrease in the benefits to the past service is immediately recognized in profit or loss. The Company recognizes gains or losses on settlement when the defined benefit plan is settled.

# *iii) Other long-term employee benefits*

The Company’s net obligation in respect of other long-term employee benefits that are not expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

27

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(p) Employee benefits (continued)**

# *iv) Termination benefits*

Termination benefits are recognized as an expense when the Company is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

# **(q) Share-based payment transactions**

In regards to the share-based payment transactions which grants an employee a stock or stock option in exchange for the goods or services provided, if the fair value of the goods or services provided or the fair value of the goods or services provided cannot be reliably measured, the Company indirectly measures the fair value of the goods or services based on the fair value of the given equity, and the amount is recognized as employee benefit expenses and capital during the vesting period. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.

Employees of the Company are entitled to share options of Shinhan Financial Group, the parent company, and the Company is required to pay cash for the compensation of the stock options in accordance with the repayment agreement with Shinhan Financial Group. The Company accounts for the share compensation expenses in the period of provision of contract services and pays them in terms of term expenses and accrued expenses, respectively. If it is not exercised and it is extinguished, any accrued expenses incurred will be deducted from compensation costs.

In addition, the Company operates a cash-settled share-based compensation system, that compensates for the difference between the market price and the exercise price of stock options in return for receiving services from the employees. The total amount to be recognized as an expense during the vesting period is determined based on the fair value of the share option granted in consideration of the terms of service. Until the liability is settled, the fair value of the liability is remeasured at the end of each reporting period and at the settlement date, and the change in fair value is recognized as salary expenses.

Regardless of the repayment payment agreement with Shinhan Financial Group, the Company's share-based payment transactions between entities in which the Company is not obligated to settle the share-based payment transaction are measured as share-based stock-based payment transactions.

# **(r) Provisions**

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.

28

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

3. Significant accounting policies (continued)

(r) Provisions (continued)

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

(s) Deferred acquisition costs

Acquisition costs arising from long-term insurance contracts are deferred within the limit in accordance with the regulation on supervision of insurance business and amortized evenly over the premium payment period. If the premium payment period is longer than seven years, the amortization period of deferred acquisition costs is seven years. When the contract is cancelled, any unamortized portion as of the cancellation date (or the date it becomes invalid in case the contract becomes ineffective before cancellation date) is fully amortized in the fiscal year in which such cancellation occurs. However, when the total balance of deferred acquisition cost exceeds the difference between the amount of net level premium reserve and surrender value level premium reserve at the end of the year, the excess amount is amortized in the business year.

(t) Classification of contracts

i) Insurance contracts

An insurance contract is a contract in which the insurer assumes significant insurance risk from the policyholder by assuring to compensate the policyholder in the event of a certain future uncertainty that adversely affects the policyholder.

Generally, significant insurance risk is when the insurer is required to make a significant charge due to the occurrence of an insurance event over the course of the insurance under normal circumstances. If the Company pays a significant surcharge under normal circumstances, then it can assume to have acquired significant insurance risk even if the event is very unlikely. When initially classified as an insurance contract, the contract remains an insurance contract even if the insurance risk becomes insignificant for the duration of the subsequent contract.

ii) Investment contracts

Contracts not classified as insurance contracts under Korean IFRS 1104 'Insurance Contracts' are classified as investment contracts. An investment contract is a contract that transfers financial risk without significant transfer of insurance risk. Investment contracts are classified into contracts with discretionary participation features and contracts without them. The discretionary participation feature refers to the contractual right to receive additional payments that are of the following features in addition to payments that are unconditional to the contract.

1 It is highly likely to constitute a significant portion of the total benefits in the contract.
2 The amount or timing is determined at the discretion of the issuer under the contract.
3 Additional benefits are calculated based on one or more of the following:
- Performance in a particular group of contracts or
- Realized or unrealized return on investment arising from a specific group of assets held by the issuer;
- Profit or loss of the entity, fund or other entity that issued the contract;

Korean IFRS 1104 'Insurance Contracts' is applied to both insurance contracts and investment contracts with discretionary participation features, and Korean IFRS 1109 'Financial Instruments' is applied to contracts without discretionary participation features.

(u) Premium income

The Company recognizes the premiums collected as income due to the arrival of the premium collection period for each payment method according to the insurance contract, and the premiums that were collected as of the end of the reporting period but whose collection date is after the next fiscal year are accounted for as an unearned insurance premium.

29

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

3. Significant accounting policies (continued)

(v) Insurance contract liabilities

The Company sets up the policy reserves under the Insurance Business Act and related regulations. The reserves are calculated according to the Insurance Terms and Conditions and the calculation method of insurance premiums and policy reserves, and the main contents are as follows:

i) Premium reserves

It is the amount to be accumulated as reserves at the end of the reporting period, for claims liable to pay in the future. It is calculated by deducting the present value of the net premium to be paid after the end of the reporting period from the present value of the premiums payable to the policyholders.

ii) Unearned premium reserves

Unearned portion of premiums that have been collected before the end of the reporting period are calculated based on insurance premiums and the policy reserves calculation method.

iii) Guarantee reserves

The total amount of reserve for variable minimum guarantee (iii-1) and reserve for general account guarantee (iii-2) is provided as guarantee reserve.

iii-1) Variable minimum guarantee reserve

This reserve is the amount that must be accumulated to guarantee claims above a certain level for contracts maintained as of the end of the reporting period, and is measured at the higher of:

a) the average amount of the top 30% of net loss expected in the future
b) statutory reserve requirements by insurance types, minimum guarantees, and limits of stock investment portion

iii-2) General account guarantee reserve

This reserve is the amount that must be accumulated to guarantee refunds and claims above a certain level for contracts maintained and managed under general account as of the end of the reporting period, and is measured at the higher of:

a) Average of the amount calculated by subtracting the adequacy test amount of the policy reserve without the guarantee option from the adequacy test amount of the policy reserve with the guarantee option for each interest rate scenario
b) The amount of compensation (including lapsed contracts) against the guarantee received from the policy holder by the rate applied at the premium calculation in the insurance premium and policy reserve calculation method

iv) Reserve for outstanding claims

As of the end of the reporting period, the Company has accrued the amount for which the reason for the payment of insurance claims, etc. has been incurred and the amount of the claim payment has not been paid yet due to the dispute or lawsuit related to the insurance settlement. In addition, the Company recognizes unrecognized losses based on historical experience.

v) Reserves for participating policyholders' dividends

The reserve is accumulated for the purpose of contributing to the policyholder dividend according to the laws and regulations and consists of the incurred policyholder dividend reserves and the dividend reserves for the subsequent year.

30

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(u) Insurance contracts liabilities (continued)**

# *v) Reserves for participating policyholders' dividends (continued)*

The incurred policyholder dividend reserve is the amount that is not paid as of the end of the reporting period for which payment is confirmed, and the reserve for dividend policy for the next fiscal year is calculated for the insurance contracts effective as of the end of the reporting period considering the expected contract extinction rate.

# *v-1) Interest rate guarantee reserve*

In the case of a dividend insurance contract which has been maintained for more than one year as of the end of the reporting period among contracts signed before October 1, 1997, the difference between the expected interest rate and the one-year maturity deposit rate shall be preserved.

# *v-2) Mortality dividend reserve*

For contracts that have been maintained for more than one year as of the end of the reporting period, dividends are accumulated to make up for the difference between the expected mortality rate and the actual mortality rate applied at the basis of insurance premium calculation.

# *v-3) Interest dividend reserve*

For the contracts that have been maintained for more than one year as of the end of the reporting period, the amount calculated by applying the interest dividend reserve rate to the net premium reserve less the deferred acquisition costs is accumulated.

However, for the insurance sold before October 1, 1997, if the expected interest rate for each insurance product after adding or subtracting the guaranteed interest rate is less than the dividend standard rate, the amount calculated by applying it to the net level premium reserve less the deferred acquisition costs at the end of the previous year is accumulated.

# *v-4) Reserves for long-term special dividends*

For the effective dividend policy agreement that has been maintained for 6 years or more, the amount calculated by applying the long-term special dividend rate to the amount deducted from the net premiums for the end of the year.

# *v-5) Reserves for insurance operating expense dividends*

For contracts that have been maintained for more than one year as of the end of the reporting period, the amount calculated by applying the standard rate of operating expense dividends at the expected annual reserves.

# *vi) Reserve for policyholder dividends*

In order to cover the policyholder dividend in the future, the amount is accumulated in accordance with the laws and regulations and the insurance contracts. The surplus of policyholder's dividend reserves before accumulation, which is the source of calculating the policyholder's dividend reserve, is the equivalent of the parent company's stake within consolidated profit or loss.

# *vii) Reserve for dividend insurance loss*

In accordance with the regulations set by the supervisory authority, dividend insurance profit is accumulated within 30/100 of the contractor's stake. The reserve loss for dividend insurance shall be preserved at the end of the reporting period within 5 years of accounting period in accordance with regulations and shall be used as the policyholder dividend source for the individual contractor.

31

# **SHINHAN LIFE INSURANCE CO., LTD.**  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(w) Policyholders' equity adjustments**

For the year ended December 31, 2022, the Company distinguishes the gain or loss on the valuation of financial assets measured at fair value through other comprehensive income between into the equity of policyholders and shareholders and presents the amount corresponding to the equity of policyholders as the policyholder’s equity adjustments. The adjusted amount of the contractor’s interest is the amount of the available-for-sale financial asset valuation gain or loss calculated in accordance with Korean IFRS 1039 based on the ratio of the average liability reserve for the dividend and non-dividend insurance policies for the current financial year.

# **(x) Liability adequacy test**

At the end of each reporting period, the Company assesses whether the recognized liability is appropriate using current estimates of the future cash flows of the insurance contract. If the result of the evaluation determines that the carrying amount of the insurance liability is inadequate in view of the estimated future cash flows, the amount equivalent to the deficit is reflected in profit or loss as an additional reserve.

# **(y) Separate accounts**

The Company distinguishes all or part of its assets equivalent to its reserves from retirement insurance, retirement pension, variable lifetime insurance, variable pension insurance, variable universal insurance and variable savings insurance from general accounts, as prescribed by the Insurance Business Act and the Regulations on Supervision of Insurance Business. The related amounts are recorded as separate account assets and separate account liabilities. In addition, funds received from or provided to separate accounts are presented as separate account payables and separate account receivables by deducting from separate account assets and special account liabilities, respectively.

Separate account assets are valued on an individual separate account basis, and securities established for variable insurance contracts are accounted for by the method of capital market and financial investment business, and other assets are used in accordance with the general account method. In addition, the policyholder reserve was calculated in accordance with the insurance premiums and liability reserves authorized by the Financial Supervisory Service Director.

The income and expenses of separate accounts with variable type (variable lifetime insurance, variable pension insurance, variable universal insurance, variable savings insurance and retirement pension) are not included in the separate comprehensive income statement of the general account. The income and expenses of the separate account (retirement insurance and retirement pension) with the principal and interest guarantee are calculated in the separate comprehensive income statement of the general account at the total amount of the separate account income and separate account expenses.

# **(z) Reinsurance assets**

The Company presents recoverable amounts from reinsurers for insurance contracts listed as reinsurance assets. The Company assesses at the end of each reporting period whether there is objective evidence that a reinsurance asset is impaired. If there is objective evidence that you will not be able to receive all amounts under the terms of the contract as a result of an event that occurred after the initial recognition, and the reinsurance assets are impaired if the case has a reliably measurable effect on the amount to be received from the reinsurer. When a reinsurance asset is impaired, the carrying amount of the asset is reduced and the impairment loss is recognized in profit or loss.

# **(aa) Paid-in capital**

Ordinary shares are classified as equity. Incremental costs directly attributable to the transaction are deducted from equity, net of any tax effects.

32

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ab) Hybrid bonds**

The Company classifies an issued financial instrument, or its component parts, as a financial liability or an equity instrument depending on the substance of the contractual arrangement of such financial instrument. Hybrid bonds where the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation are classified as an equity instrument and presented as part of equity.

# **(ac) Income tax**

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Shinhan Financial Group, the parent company of the Company, reported and paid corporate taxes by considering the entire domestic subsidiary company, including the Company, as a single tax unit, and the separate tax burden amount was counted as the current corporate tax liability. The deferred tax liabilities and assets are recognized as temporary differences between the carrying amount of assets and liabilities and the tax value, and items directly attributable to the Company among the future tax burden to be paid for tax losses and tax credits that can be carried forward and deducted.

# *i) Current tax*

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit. The unpaid taxes related to the Company's current tax are calculated using the enacted or substantially established tax rate.

# *ii) Deferred tax*

For additional temporary differences in subsidiaries, associates, and joint venture investment interests, the Company may control the timing of the disappearance of temporary differences. All deferred tax liabilities are recognized except in cases where temporary differences are unlikely to dissipate in the foreseeable future. Deferred tax assets arising from deductible temporary differences are likely to be extinguished in the foreseeable future. In addition, it is recognized when taxable income is likely to be used for temporary differences.

The carrying value of deferred tax assets is reviewed at the end of each reporting period. The carrying value of deferred tax assets is reduced when it is no longer likely that sufficient taxable income will be generated to use benefits from deferred tax assets.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the way the Company expects, at the end of the reporting period to recover or settle the carrying value of its assets and liabilities.

Deferred tax assets and liabilities are corporate taxes imposed by the same taxation authority. Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets.

33

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ad) Earnings per share**

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholder of the Company by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

# **(ae) New standards and amendments not yet adopted by the Company**

The following new accounting standards and amendments have been published that are not mandatory for annual periods beginning after January 1, 2022 and have not been early adopted by the Company.

# *i) Korean IFRS 1001 'Presentation of Financial Statements' amended - Classification of Liabilities as Current or Non-current*

The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity's own equity instruments, however, it would be excluded if an option to settle them by the entity's own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2024, and earlier application is permitted. The Company expects that the amendments will not have a significant impact on the separate financial statements.

# *ii) Korean IFRS 1001 'Presentation of Financial Statements' amended - Disclosure of Accounting Policies*

The amendments require an entity to define and to disclose its material information about accounting policies. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Company is reviewing the impact of amendments on the financial statements.

# *iii) Korean IFRS 1008 'Accounting Policies, Changes in Accounting Estimates and Errors' amended - Definition of Accounting Estimates*

The amendments clarify the definition of accounting estimates and how distinguish it from a change in accounting policies. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Company expects that the amendments will not have a significant impact on the separate financial statements.

# *iv) Korean IFRS 1012 'Income Taxes' amended - Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction*

Under the amendments, an entity does not apply the initial recognition exemption for transactions which involve the recognition of both an asset and liability - which in turn leads to equal taxable and deductible temporary differences. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Company expects that the amendments will not have a significant impact on the separate financial statements.

34

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# v) *Korean IFRS 1117 'Insurance Contracts'*

# 1 Key amendments to accounting policies

The accounting standards and amendments have been published that are not mandatory for December 31, 2022 reporting periods and have not been early adopted by the Company.

Korean IFRS 1117 *'Insurance Contracts'* enacted on April 23, 2021 will be applied for annual periods beginning on or after January 1, 2023. The standard will replace Korean IFRS 1104 *'Insurance Contracts'* which is the current standard.

The main features of Korean IFRS 1117 include measurement of the current value of insurance liabilities, recognition of insurance revenue on an accrual basis, and separate presentation of investment income or expenses from insurance income or expenses. Under Korean IFRS 1104, insurance liability was measured using historical information (e.g., interest rates at sale, etc.). In addition, when the entity receives the premium, it recognizes the premium received as an insurance revenue on a cash basis and there is no obligation to present insurance and investment income or expense separately. On the contrary, Korean IFRS 1117 measures insurance liability at its present value (i.e., at the reporting date) by using updated discount rates which reflect current market-based information such as assumptions and risks. An insurance revenue is recognized on an accrual basis, reflecting the services provided to the policyholder by the insurance company for each fiscal year. Moreover, insurance income or expenses and the investment income or expenses will be presented separately.

If the Company applies Korean IFRS 1117 in preparation of financial statements, significant differences with current financial statements may arise due to the following reasons. These differences do not include all of the future differences and they may be changed depending on further analysis.

# [Evaluation of insurance liabilities]

Under Korean IFRS 1117, the Company estimates all cash flows under the insurance contract, then measures insurance liability by using discount rates that reflect assumptions and risks at the reporting date.

Specifically, the Company identifies a portfolio of insurance contracts which comprises contracts subject to similar risks and managed together and disaggregates the groups of insurance contracts with similar profitability within the portfolio. Then, the Company measures the groups of insurance contracts at the total of estimates of future cash flows (reflecting cash flows related to insurance contract loans and the time value of money), risk adjustment and contractual service margin. Upon the application of Korean IFRS 1117, contractual service margin account which presents the unrealized profit that the company will recognize as it provides services in the future has been newly introduced.

Reinsurance contract is an insurance contract issued by one entity (the reinsurer) to compensate another entity for claims arising from one or more insurance contracts issued by that another entity (underlying insurance contracts). When estimating present value of future cash flows arising from reinsurance contracts, the Company would use assumptions consistent with those it uses for the underlying contracts.

The Company calculates the discount rate for measuring the current value of an insurance liability using the bottom-up approach, such as, by adding a liquidity premium to the risk-free rate of return (risk-free interest rate term structure) and the confidence level to calculate risk adjustment which reflects measurement of an uncertainty regarding the amount and timing of cash flows in a non-financial risk (insurance risk, cancellation risk, cost risk, etc.).

35

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ad) New standards and amendments not yet adopted by the Company (continued)**

# *v) Korean IFRS 1117 'Insurance Contracts' (continued)*

# 1 Key amendments to accounting policies (continued)

# [Evaluation of insurance liabilities (continued)]

For insurance liability measurement models, the General Model (GM) is applied for underlying contracts, etc., but the Variable Fee Approach (VFA) is applied for insurance contracts that have direct participation features that meet certain requirements. However, Premium Allocation Approach (PAA) is applied for contracts with a coverage period of one year or less at the time of initial recognition.

# [Recognition and measurement of financial performance]

According to Korean IFRS 1117, insurance revenue is recognized on an accrual basis including services (insurance coverage) provided to the policyholder for each fiscal year. Investment components (such as cancellation or maturity refunds) being repaid to the policyholder even if an insured event does not occur, are excluded from insurance revenue. Insurance income or expenses and investment income or expenses are presented separately to enable information users to understand the sources of profits or losses.

The Company includes time value of money and financial risk, and the effect of changes in the time value of money and financial risk related to the groups of insurance contracts in the insurance finance income or expenses. This requires the Company to make an accounting policy choice as to whether to disaggregate insurance finance income or expenses for the period between profit or loss and other comprehensive income.

The Company disaggregates the amounts recognized in the statements of profit or loss and other comprehensive income by portfolios. In case of applying the ‘General Model (GM)’, insurance finance income or expenses are recognized in other comprehensive income.

# [Accounting policies related to transition]

According to the transition of Korean IFRS 1117, the Company shall adjust the groups of insurance contracts issued before the transition date, that is measured at cost to be measured at its current value by applying a full retrospective approach, modified retrospective approach or fair value approach (January 1, 2022, the beginning of the annual reporting period immediately preceding the date of initial application).

In principle, the Company shall identify, recognize, and measure (full retrospective approach) each group of insurance contracts as if Korean IFRS 1117 had been applied even before the transition date. However, if this approach is impracticable, the Company may choose to apply either the modified retrospective approach or fair value approach. On the other hand, for groups of insurance contracts with direct participation features which meet certain criteria, a fair value approach may be applied even if the full retrospective approach is applicable.

The objective of the modified retrospective approach is to achieve the closest outcome to full retrospective application possible using reasonable and supportable information available without undue cost or effort. The fair value approach is an approach of assessing a group of insurance contracts using fair value assessments, etc. in accordance with Korean IFRS 1113 ‘Fair Value Measurement’. To apply the fair value approach, the Company shall determine the contractual service margin or loss component of the liability for remaining coverage at the transition date as the difference between the fair value of a group of insurance contracts and the fulfilment cash flows measured at that date.

36

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# *v) Korean IFRS 1117 'Insurance Contracts' (continued)*

# 1 Key amendments to accounting policies (continued)

[Accounting policies related to transition (continued)]

The Company applies modified retrospective approach only for underlying contracts issued within three years before the transition date, and fair value approach for other underlying contracts and reinsurance contracts held, to measure insurance liability at transition date.

# 2 Preparation for application

As part of preparation for the launch of an integrated corporation in 2021, the Company has completed setting up actuarial assumptions and models and insurance liability settlement system. Before 2023, when the standard is first applied, the Company is planning to continue fostering and reinforcing additional professionals and will constantly promote advancement, including improvements on system stability and verification of the consistency of data output. Also, the Company is being overhauled and established an Internal Control of Financial Reporting that goes along with the dynamic accounting environment in order to prepare and disclose reliable accounting information.

The application of Korean IFRS 1117 will not only result to a change in accounting standards, but will also affect insurance product development, sales strategies, and long-term management strategies. Therefore, with the aim of re-establishment of the overall business management system, the Company will continue to provide training to the employees and report to the management the status and implementation plan of Korean IFRS 1117.

# 3 Preliminary financial effects analysis

As the implementation of Korean IFRS 1117 results to changes in the measurement of liabilities, revenue recognition, etc., the Company expects that it will lead to a volatility in financial figures of financial statements prepared for the year ended 2023.

The Company’s assessment of financial impact of the initial application of Korean IFRS 1117 using the current financial reporting system established as of December 31, 2022, for the financial statements prepared for the year ended 2022 are as follows. However, at this point, it is difficult in practice to provide reasonable estimates of the impact on future financial statements, as sufficient review and analysis of accounting policies and actuarial assumptions and methodology for the application of Korean IFRS 1117 is still in progress. Therefore, the results on analysis are subject to change depending on additional information and economic conditions available in the future.

37

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# *v) Korean IFRS 1117 'Insurance Contracts' (continued)*

# 3 Preliminary financial effects analysis (continued)

# (i) Impact on the statement of financial position and the statement of comprehensive income

The Company, in accordance with its business model for managing financial assets, has classified financial assets into debt instruments measured at amortized cost and at fair value through other comprehensive income, and equity instruments measured at fair value through other comprehensive income and at fair value through profit or loss. The initial application of Korean IFRS 1117 will allow for revaluation of business model, re-designation of financial assets designated at fair value through profit or loss and equity instruments designated at fair value through other comprehensive income, thereby changing the classification and measurement of financial assets for capital volatility management purposes. Accordingly, the Company assessed the financial impact by applying the classification adjustments in Korean IFRS 1117 to financial assets derecognized between the transition date and the initial application date, to present comparative information for financial assets where its classification and measurement requirements in Korean IFRS 1109 have been applied to those assets.

The Company also applies the overlay approach under Korean IFRS 1104 to financial assets associated with insurance contracts in applying Korean IFRS 1109, but the 2022 financial impact comparative information was prepared without reclassification between profit or loss and other comprehensive income.

In accordance with the detailed enforcement regulations on supervision of insurance business, the net amount of assets and liabilities is presented on a single line in the statement of financial position and the income and expenses of financial guarantee insurance on separate accounts is presented on a single line in the statement of comprehensive income under Korean IFRS 1104. However, under Korean IFRS 1117, the assets, liabilities, income and expenses of separate accounts are presented as a net amount with the related general accounts, and the internal transactions between the general account and the separate account are removed.

38

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# v) *Korean IFRS 1117 'Insurance Contracts' (continued)*

# 3 Preliminary financial effects analysis (continued)

# (i) Impact on the statement of financial position and the statement of comprehensive income (continued)

# **<Statement of Financial Position>**

The statement of financial position prepared in accordance with Korean IFRS 1104 and Korean IFRS 1117 as at December 31, 2022 are as follows:

*(In millions of won)*

| Accounts | Under Korean IFRS 1104 and 1109 (A) | Accounts | Under Korean IFRS 1117 and 1109 (B) | (B-A) |
| --- | --- | --- | --- | --- |
| Total Assets | ₩ 66,660,617 | Total Assets | 56,407,165 | (10,253,452) |
| Cash and due from banks at amortized cost | 942,568 | Cash and due from banks at amortized cost | 1,483,695 |  |
| Financial assets at fair value through profit or loss | 6,713,923 | Financial assets at fair value through profit or loss | 11,658,704 |  |
| Securities at fair value through other comprehensive income | 10,902,099 | Securities at fair value through other comprehensive income | 32,629,372 |  |
| Securities at amortized cost | 27,744,212 | Securities at amortized cost | 4,338,766 |  |
| Loans at amortized cost | 8,612,409 | Loans at amortized cost | 4,219,870 |  |
| Reinsurance contract assets | 295,621 | Reinsurance contract assets | 59,017 |  |
| Other assets(*) | 11,449,785 | Other assets | 2,017,741 |  |
| Total Liabilities | 63,164,441 | Total Liabilities | 48,307,162 | (14,857,279) |
| Insurance contract liabilities | 53,368,390 | Insurance contract liabilities | 42,927,163 |  |
|  |  | Reinsurance contract liabilities | 62,770 |  |
|  |  | Investment contract liabilities | 2,296,401 |  |
| Other liabilities(*) | 9,796,051 | Other liabilities | 3,020,828 |  |
| Total equity | 3,496,176 | Total equity | 8,100,003 | 4,603,827 |

(*) Other assets and other liabilities include ₩ 8,248,962 million of separate account assets and ₩ 8,168,178 million of separate account liabilities presented in a total amount in accordance with Korean IFRS 1104.

39

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# v) *Korean IFRS 1117 'Insurance Contracts' (continued)*

# 3 Preliminary financial effects analysis (continued)

# (i) Impact on the statement of financial position and the statement of comprehensive income (continued)

# **<Statement of Comprehensive Income>**

The statement of comprehensive income prepared in accordance with Korean IFRS 1104 and Korean IFRS 1117 for the year ended December 31, 2022 are as follows:

*(In millions of won)*

| Accounts | Under Korean IFRS 1104, 1109, and overlay approach under 1104 (A) | Accounts | Under Korean IFRS 1117 and 1109 (B) | (B-A) |
| --- | --- | --- | --- | --- |
| Operating income | ₩ 9,208,373 | Insurance service result | 729,093 |  |
|  |  | Insurance service revenue | 756,438 |  |
|  |  | Net reinsurance service expenses | (27,345) |  |
| Operating expenses | (8,587,604) | Net investment result | (172,810) |  |
|  |  | Investment income(*) | 598,660 |  |
|  |  | Insurance finance expenses | (771,470) |  |
| Operating profit | 620,769 | Operating profit | 556,283 | (64,486) |
| Non-operating income or expenses | (21,810) | Non-operating income | (21,921) |  |
| Profit before income taxes | 598,959 | Profit before income taxes | 534,362 | (64,597) |
| Income tax expense | (128,488) | Income tax expense | (111,370) |  |
| Profit for the year | 470,471 | Profit for the year | 422,992 | (47,479) |
| Other comprehensive income (loss) for the year | (2,124,151) | Other comprehensive income (loss) for the year | (595,352) |  |
| Total comprehensive income (loss) for the year | (1,653,680) | Total comprehensive income (loss) for the year | (172,360) | 1,481,320 |

(*) The amount was prepared without reclassification between profit or loss and other comprehensive income under the overlay approach.

However, if Korean IFRS 1039 had been applied to financial assets related to insurance contracts, the current accounting standard (the overlay approach) that reclassifies assets into other comprehensive income rather than profit or loss, the financial effect due to the application of Korean IFRS 1117 is expected to be ₩ 739,108 million, an increase of ₩ 140,149 million from ₩ 598,959 million in profit before income taxes under Korean IFRS 1104.

40

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# v) *Korean IFRS 1117 'Insurance Contracts' (continued)*

# 3 Preliminary financial effects analysis (continued)

The preliminary financial effect analysis on the application of Korean IFRS 1117 at each stage is as follows:

(In millions of won)

| Accounts | Under Korean IFRS 1117, 1109 and the application of overlay approach (A) | Under Korean IFRS 1117 and 1109 (B) | (B-A) |
| --- | --- | --- | --- |
| Insurance service result | ₩ 729,093 | 729,093 |  |
| Insurance service revenue | 756,438 | 756,438 |  |
| Net reinsurance service expenses | (27,345) | (27,345) |  |
| Net financial result | 31,936 | (172,810) | (204,746) |
| Investment income(*) | 803,406 | 598,660 |  |
| Insurance finance expenses | (771,470) | (771,470) |  |
| Operating profit | 761,029 | 556,283 | (204,746) |
| Non-operating income | (21,921) | (21,921) |  |
| Profit before income taxes | 739,108 | 534,362 | (204,746) |
| Income tax expense | (165,628) | (111,370) |  |
| Profit for the year | 573,480 | 422,992 | (150,488) |
| Other comprehensive income (loss) for the year | (745,840) | (595,352) | 150,488 |
| Total comprehensive income (loss) for the year | (172,360) | (172,360) | - |

(*) The overlay approach reclassification amount of ₩ 314,404 million (Note 11(b)) to financial assets measured at fair value through profit or loss valuation and disposal gains of ₩ 204,746 million, which takes into account the business model reclassification impact at the date of transition, is assumed to be reclassified from profit or loss (investment income) to other comprehensive income.

# **<Statement of Cash Flows>**

(In millions of won)

| Accounts | Under Korean IFRS 1104 and 1109 (A) | Under Korean IFRS 1117 and 1109 (B) | (B-A) |
| --- | --- | --- | --- |
| Cash flows from operating activities | ₩ (893,458) | (1,288,784) | (395,326) |
| Cash flows from investing activities | 255,652 | 580,502 | 324,850 |
| Cash flows from financing activities | (35,255) | (35,255) | - |

41

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **3. Significant accounting policies (continued)**

# **(ae) New standards and amendments not yet adopted by the Company (continued)**

# v) *Korean IFRS 1117 'Insurance Contracts' (continued)*

# 3 Preliminary financial effects analysis (continued)

# (ii) Financial impact of transition to Korean IFRS 1117

As of the transition date (January 1, 2022), the measurement of liability for underlying contracts held, using different transition approaches is as follows:

(In millions of won)

| Transition approach | Date issued - insurance contract | Insurance contract liabilities | Contractual Service Margin |
| --- | --- | --- | --- |
| Modified retrospective approach | 2019 - 2021 | ₩ 1,437,967 | 2,734,701 |
| Fair value approach | Before 2018 | 49,184,220 | 3,753,602 |
|  |  | ₩ 50,622,187 | 6,488,303 |

As of the transition date (January 1, 2022), the amount of reinsurance contracts held calculated by applying the fair value approach is ₩ 281,763 million of reinsurance contract liabilities.

# (iii) Financial impact on insurance assets and liabilities

As of December 31, 2022, the amount of insurance contract liabilities applying Korean IFRS 1117 is as follows:

(In millions of won)

| Classification | Insurance contract liabilities | Contractual service margin (under liabilities) | Insurance contract assets | Contractual service margin (under assets) |
| --- | --- | --- | --- | --- |
| Underlying contracts | ₩ 42,927,163 | 6,924,913 | - | - |
| Reinsurance contracts | 62,770 | (83,185) | 59,017 | 94,861 |
|  | ₩ 42,989,933 | 6,841,728 | 59,017 | 94,861 |

# vi) *Korean IFRS 1001 'Presentation of Financial Statements' - Classification of Debt with Covenants as Current or Non-current*

The amendments require disclosure of the carrying amount of the financial liability and its related gains or losses if, all or part of a financial instrument subject to adjustment of the exercise price according to changes in the issuer's stock price. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Company expects that the amendments will not have a significant impact on the separate financial statements.

42

# **SHINHAN LIFE INSURANCE CO., LTD.**
**Notes to the Separate Financial Statements**
December 31, 2022 and 2021

# **4. Financial risk management**

# (a) Overview

The essence of the insurance business is to take over and manage risks. Insurance products, unlike other financial products, can be exposed to various risks during management activities because of its underlying nature of complex pricing elements and long contract periods. The Company has established and operated a risk management system to manage the nature of these complex insurance products and the various risks that may arise from uncertain external financial environments.

The Company manages various risks that may arise, and the main targets are credit risk, market risk, interest rate risk, operational risk and liquidity risk. These risks are recognized, measured, controlled, and reported in accordance with the risk management regulations set by the Company.

# *i) Risk management principles*

The Company's risk management is guided by the following core principles:

- Mutual harmonization of risk and profit
- Determines risk acceptance levels in accordance with business objectives and strategies;
- Management performance is measured and evaluated by reflecting risk;
- Diversify risks appropriately to prevent concentration of risks in specific sectors;
- Supervision and control of risk management shall be carried out independently from business activities; and
- Risk management uses formal procedures or methods, such as documents.

# *ii) Risk management organization*

# 1 Risk Management Committee

The Risk Management Committee, the highest risk-related decision making body, has established risk management policies such as risk recognition, measurement and control, and monitors its compliance.

# 2 Risk Management Steering Committee

The Risk Management Steering Committee decides on matters affecting risks such as establishing measures according to the status of risk management by sector, establishing and adjusting basic policies on optimal management and procurement of assets and liabilities, entering new businesses or establishing and changing major policies. The committee reviews the resolutions of the Risk Management Committee.

# 3 Investment Steering Committee

The Investment Steering Committee is responsible for making credit and investment decisions, credit risk management and credit policy. The Risk Management Committee delegates details for risk management and efficient implementation of resolutions.

# *iii) Risk management procedures*

The Company manages risk limits by type, such as market and credit risk, within the total risk limit determined by the Company's Risk Management Committee when establishing annual business plans, including annual financial plans, product portfolio plans, and RBC plans. In addition, the Company calculates and evaluates risks and the different types of risks on a monthly basis by comparing it with the risk tolerance limit then reports results to the management, as well as the risk management committee.

43

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (b) Credit risk

Credit risk is the risk of potential economic loss or the risk of a counterparty failing to meet its contractual obligations within terms of deposits, loans, securities etc., in which funds are provided in the form of loans or bond purchases, or a legal agreement of an underlying asset at a predetermined price to be exchanged at a specific future date, due to bankruptcy of a debtor, decrease in credit ratings, counterparty default etc. The Company aims to maintain the level of the risk and to minimize the realization of the risk by regulating a specific method of risk management for the risk of economic losses arising from a failure in meeting contractual obligations, such as bankruptcy of the debtor or counterparty default.

# *(i) Variables, assumptions, and techniques used to measure impairment*

# i-1) How to determine whether credit risk increases significantly after initial recognition

The Company assesses at the end of each reporting period whether the credit risk of a financial instrument has significantly increased since its initial recognition, and when assessing the significant increase in credit risk, the Company uses changes in the risk of a default occurring over the expected life of financial instrument, instead of using the changes in expected credit losses. To make this assessment, the risk of a default occurring on a financial instrument at the reporting date is compared with the risk of a default occurring on the financial instrument at the date of initial recognition and the Company considers information that is available, reasonable, and supportable without undue cost or effort as a reference to an indication of a significant increase in the credit risk after the initial recognition. This information includes data on defaults held by the Company and analysis by internal credit rating experts.

# *(i) Measurement of default risk*

The Company assigns internal credit ratings to individual exposures based on observations found to have a reasonable correlation with default risks and judgments based on experience. Internal credit ratings are determined by considering both qualitative and quantitative factors that indicate the risk of default. These factors may vary depending on the nature of the exposure and the type of borrower.

# *(ii) Measurement of default rate term structure*

The internal credit rating is the main input for determining the default rate period structure. The Company is accumulating information on the pattern of exposure exposed to credit risk and the type of product and next week and the internal credit rating results, and some portfolios utilize information obtained from external credit rating agencies. The Company applies statistical techniques to estimate the default rate for the remaining maturity of an exposure from accumulated data and to predict changes in the estimated default rate over time.

# *(iii) Significant increase in credit risk*

The Company utilizes indicators defined by portfolio to determine significant increases in credit risk, which generally consist of changes in the estimated default risk from changes in internal credit ratings, qualitative factors, and the number of days past due.

The Company considers that the credit risk of a financial asset has increased significantly after the initial recognition if the number of days overdue for a specific exposure exceeds 30 days. The Company calculates overdue days from the earliest date when the Company has not fully received the contractual payments to be received from the borrower and the grace period granted to the borrower is not considered.

44

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

4. Financial risk management (continued)

(b) Credit risk (continued)

i) Variables, assumptions and techniques used to measure impairment (continued)

i-1) How to determine whether credit risk increases significantly after initial recognition (continued)

(iii) Significant increase in credit risk (continued)

The Company periodically reviews the criteria for determining whether credit risk has increased significantly from the following points of view:

- A significant increase in credit risk shall be identified prior to the occurrence of default.
- The criteria established to judge the significant increase in credit risk shall have a more predictive power than the criteria for days of delinquency.
- As a result of applying the judgment criteria, financial instruments shall not be to move too frequently between the 12-months expected credit losses measurement and the lifetime expected credit losses measurement.

i-2) Modified financial assets

If the contractual cash flows on a financial asset have been renegotiated or modified but the financial asset was not derecognized, the Company assesses whether there has been a significant increase in the credit risk of the financial instrument by comparing the risk of a default occurring at initial recognition based on the original, unmodified contractual terms and the risk of a default occurring at the reporting date based on the modified contractual terms.

The Company may adjust the contractual cash flows of loans to customers who are in financial difficulties in order to manage the risk of default and enhance the collectability (hereinafter referred to as 'debt restructuring'). These adjustments generally involve extension of maturity, changes in interest payment schedule, and changes in other contractual terms.

Debt restructuring is a qualitative indicator of a significant increase in credit risk and the Company recognizes lifetime expected credit losses for the exposure expected to be the subject of such adjustments. If a borrower faithfully makes payments of contractual cash flows that were modified in accordance with the debt restructuring or if the borrower's internal credit rating has recovered to the level prior to the recognition of the lifetime expected credit losses, the Company recognizes the 12-months expected credit losses for that exposure again.

i-3) Risk of default

The Company considers a financial asset to be in default if it meets one or more of the following conditions:

- If a borrower is overdue 90 days or more from the contractual payment date,
- If the company judges that it is not possible to recover principal and interest without enforcing the collateral on a financial asset

The Company uses the following indicators when determining whether a borrower is in default:

- Qualitative factors (e.g. breach of contract terms),
- Quantitative factors (e.g. if the same borrower does not perform more than one payment obligations to the Company, the number of days past due per payment obligation. However, in the case of a specific portfolio, the Company uses the number of days past due for each financial instrument)
- Internal data and external data

45

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

**4. Financial risk management (continued)**

(b) Credit risk (continued)

*i) Variables, assumptions and techniques used to measure impairment (continued)*

i-3) Risk of default (continued)

The definition of default applied by the Company generally conforms to the definition of default defined for regulatory capital management purposes; however, depending on the situations, the information used to determine whether a default has incurred and the extent thereof may vary.

i-4) Measurement of expected credit loss

The main variables used to measure expected credit loss are as follows:

- Probability of Default (PD)
- Loss Default (LGD)
- Exposure At Default (EAD)

These variables have been estimated from historical experience data by using the statistical techniques developed internally by the Company and have been adjusted to reflect forward-looking information.

Estimates of PD over a specified period are estimated by reflecting characteristics of counterparties and their exposure, based on a statistical model at a specific point of time. The Company uses its own information to develop a statistical credit assessment model used for the estimation, and additional information observed in the market is considered for some portfolios such as a group of large corporates. When a counterparty or exposure is concentrated in specific grades, the method of measuring PD for those grades would be adjusted, and the PD by grade is estimated by considering contract expiration of the exposure.

LGD refers to the expected loss if a borrower defaults. The Company calculates LGD based on the experience recovery rate measured from past default exposures. The model for measuring LGD is developed to reflect type of collateral, seniority of collateral, type of borrower, and cost of recovery. In particular, LGD for retail loan products uses loan to value (LTV) as a key variable. The recovery rate reflected in the LGD calculation is based on the present value of recovery amount, discounted at the effective interest rate.

EAD refers to the expected exposure at the time of default. The Company derives EAD reflecting a rate at which the current exposure is expected to be used additionally up to the point of default within the contractual limit. EAD of financial assets is equal to the total carrying value of the asset, and EAD of loan commitments or financial guarantee contracts is calculated as the sum of the amount expected to be used in the future.

In measuring expected credit losses on financial assets, the Company uses the contractual maturity as the period subject to expected credit loss measurement. The contractual maturity is computed taking into account the extension right held by the borrower.

Risk factors of PD, LGD and EAD are collectively estimated according to the following criteria:

- Type of item
- Internal credit rating
- Type of collateral
- Loan-To-Value ratio (LTV)
- Borrower's industry
- Borrower or collateral
- Days overdue

46

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# *i) Variables, assumptions and techniques used to measure impairment (continued)*

# i-4) Measurement of expected credit loss (continued)

The criteria classifying groups is periodically reviewed to maintain homogeneity of the group and adjusted if necessary. The Company uses external benchmark information to supplement internal information for a particular portfolio that did not have sufficient internal data accumulated from the experience.

# i-5) Reflection of forward-looking information

The Company reflects future forward-looking information presented by a group of internal experts based on various information when measuring expected credit losses. The Company utilizes economic forecasts disclosed by domestic and foreign research institutes, governments, and public institutions to predict forward-looking information.

The Company reflects the expected future macroeconomic circumstance in the measurement of expected losses from a neutral perspective. The expected losses from this perspective reflect the most likely circumstances and are based on the same assumptions that the Company is based on when establishing business plans and management capabilities.

The Company analyzed the data experienced in the past, derived correlations between major macroeconomic variables and credit risks required for predicting credit risk and credit loss for each portfolio, and then reflected future forecast information through regression estimation.

| Key macroeconomic variables | Correlation with credit risk |
| --- | --- |
| Private Consumption growth rate | Negative |
| Growth rate of construction investment | Negative |
| 3Y Government bonds |  |
| Unemployment rate | Positive |
| GDP growth rate | Negative |
| Facility investment rate | Negative |
| Consumer price fluctuation rate | Positive |
| Net exports | Negative |

The predicted correlations between the macroeconomic variables and the risk of default, used by the Company, are derived based on data from the past more than ten years.

The recent default rate is an important reference when estimating the default rate considering the future economic outlook. Although various economic indicators have deteriorated due to the recession caused by COVID-19 in 2022, the actual default rate of the Company has remained stable. This is deemed to be due to various policy support for COVID-19.

# i-6) Write-off of financial assets

The Company writes off a portion of or entire loan or debt security that is not expected to receive its principal and interest. In general, the Company conducts write-off when it is deemed that the borrower has no sufficient resources or income to repay the principal and interest. Such determination on write-off is carried out in accordance with the internal rules of the Company and is carried out with the approval of an external institution, if necessary. Apart from write-off, the Company may continue to exercise its right of collection under its own recovery policy even after the write-off of financial assets.

47

# SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021

# 4. Financial risk management (continued)

# (b) Credit risk (continued)

# ii) Limits and Risk Management Principles

The Company's credit risk management principles are as follows.

- Establish and comply with soundness management indicators and allowable limits for credit loans.
- Manage through periodic credit screening.
- Comply with credit risk limits and investment limits.
- For asset management, organize and operate an appropriate portfolio and avoid biased investment.

# iii) Maximum exposure to credit risk

The Company's maximum exposure to credit risk as of December 31, 2022 and 2021, are as follows:

(In millions of won)

Due from banks and loans at amortized cost (*1)(*2):

|  | 2022 | 2021 |
| --- | --- | --- |
| Banks | ₩ 778,195 | 859,707 |
| Retail |  |  |
| - Residential mortgage | 621,327 | 655,080 |
| - Others | 5,288,634 | 5,188,999 |
| Government/Public sector/Central bank | 160,270 | 162,725 |
| Corporations |  |  |
| - Conglomerate | 53,778 | 603,381 |
| - SMEs | 257,118 | 290,258 |
| - Special financing | 2,336,202 | 2,373,734 |
| - Others | 59,453 | 53,593 |
|  | 9,554,977 | 10,187,477 |

Due from banks at fair value through profit or loss:

| Banks | 26,116 | 34,262 |
| --- | --- | --- |
|  | 9,581,093 | 10,221,739 |
| Securities at fair value through profit or loss | 6,590,506 | 6,504,249 |
| Securities at fair value through other comprehensive income | 10,851,824 | 14,228,418 |
| Securities at amortized cost (*2) | 27,744,212 | 26,806,395 |
| Derivative assets | 91,937 | 5,888 |
| Receivables at amortized cost (*2) | 1,071,865 | 980,977 |
| Off-balance sheet accounts |  |  |
| Unused loan commitments | 436,191 | 460,691 |
| Contribution commitments | 1,626,048 | 1,222,778 |
|  | 57,993,676 | 60,431,135 |

(*1) The due from banks at amortized cost includes cash equivalents.

(*2) The maximum exposure amount to due from banks and loans at amortized cost, securities at amortized cost, and receivables at amortized cost is the net amount less credit loss allowance, etc.

48

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# *iv) Impairment information by credit risk of financial instruments*

Details of impaired financial assets due to credit risk as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 12-month expected loss |  | Life-time expected loss |  | Total | Allowances | Net | Mitigation of credit risk due to collateral |
|  | Grade 1(*1) | Grade 2(*1) | Grade 2(*1) | Impaired |  |  |  |  |
| (In millions of won) |  |  |  |  |  |  |  |  |
| Due from banks and loans at amortized cost (*2): |  |  |  |  |  |  |  |  |
| Banks | ₩ 778,466 | 256 | - | - | 778,722 | (527) | 778,195 | - |
| Retail |  |  |  |  |  |  |  |  |
| - Residential mortgage | 534,856 | 34,923 | 50,888 | 1,690 | 622,357 | (1,030) | 621,327 | 609,081 |
| - Others | 5,265,831 | 22,847 | 5,978 | 13,830 | 5,308,486 | (19,852) | 5,288,634 | 5,050,441 |
| Government/Public sector/Central bank | 160,383 | - | - | - | 160,383 | (113) | 160,270 | - |
| Corporations |  |  |  |  |  |  |  |  |
| - Conglomerate | 33,028 | 3,461 | 18,758 | - | 55,247 | (1,469) | 53,778 | - |
| - SMEs | 236,864 | 20,612 | - | - | 257,476 | (358) | 257,118 | 19,852 |
| - Special financing | 2,300,946 | - | 39,986 | - | 2,340,932 | (4,730) | 2,336,202 | 515,801 |
| - Others | 59,442 | - | - | 12 | 59,454 | (1) | 59,453 | 59,453 |
|  | 9,369,816 | 82,099 | 115,610 | 15,532 | 9,583,057 | (28,080) | 9,554,977 | 6,254,628 |
| Securities at fair value through other comprehensive income (*3) | 10,851,824 | - | - | - | 10,851,824 | - | 10,851,824 | - |
| Securities at amortized cost | 27,749,881 | - | - | - | 27,749,881 | (5,669) | 27,744,212 | - |
| Receivables at amortized cost | 1,065,013 | 239 | 2,174 | 36,375 | 1,103,801 | (31,936) | 1,071,865 | 47,190 |
| Ending balance | ₩ 49,036,534 | 82,338 | 117,784 | 51,907 | 49,288,563 | (65,685) | 49,222,878 | 6,301,818 |

49

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

(b) Credit risk (continued)

*iv) Impairment information by credit risk of financial instruments (continued):*

(\*1) Credit quality of due from banks and loans was classified based on the internal credit rating as follows:

| Type of Borrower | Grade 1 | Grade 2 |
| --- | --- | --- |
| Governments/public institutions/central bank | OECD sovereign credit rating of 6 or above | OECD sovereign credit rating of below 6 |
| Retail | Internal credit rating of 5 or above | Internal credit rating of below 5 |
| Corporations/banks | Internal credit rating of BBB+ or above | Internal credit rating of below BBB+ |

(\*2) The due from banks at amortized cost includes cash equivalents.

(\*3) Provision for credit loss allowance for securities at fair value through other comprehensive income amounted to ₩6,310 million.

50

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# iv) Impairment information by credit risk of financial instruments (continued)

Details of impaired financial assets due to credit risk as of December 31, 2022 and 2021, are as follows (continued):

|  | 2021 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 12-month expected loss |  | Life-time expected loss |  | Total | Allowances | Net | Mitigation of credit risk due to collateral |
|  | Grade 1(*1) | Grade 2(*1) | Grade 2(*1) | Impaired |  |  |  |  |
| (In millions of won) |  |  |  |  |  |  |  |  |
| Due from banks and loans at amortized cost (*2): |  |  |  |  |  |  |  |  |
| Banks | ₩ 859,846 | 197 | - | - | 860,043 | (336) | 859,707 | - |
| Retail |  |  |  |  |  |  |  |  |
| - Residential mortgage | 573,442 | 37,499 | 43,249 | 1,366 | 655,556 | (476) | 655,080 | 646,397 |
| - Others | 5,158,197 | 23,250 | 5,662 | 14,734 | 5,201,843 | (12,844) | 5,188,999 | 4,939,729 |
| Government/Public sector/Central bank | 162,858 | - | - | - | 162,858 | (133) | 162,725 | - |
| Corporations |  |  |  |  |  |  |  |  |
| - Conglomerate | 496,516 | 103,684 | 4,422 | - | 604,622 | (1,241) | 603,381 | 41 |
| - SMEs | 270,721 | 19,912 | - | - | 290,633 | (375) | 290,258 | 19,790 |
| - Special financing | 2,363,464 | - | 14,981 | - | 2,378,445 | (4,711) | 2,373,734 | 552,021 |
| - Others | 53,450 | - | - | 208 | 53,658 | (65) | 53,593 | 53,593 |
|  | 9,938,494 | 184,542 | 68,314 | 16,308 | 10,207,658 | (20,181) | 10,187,477 | 6,211,571 |
| Securities at fair value through other comprehensive income (*3) | 14,228,418 | - | - | - | 14,228,418 | - | 14,228,418 | - |
| Securities at amortized cost | 26,812,886 | - | - | - | 26,812,886 | (6,491) | 26,806,395 | - |
| Receivables at amortized cost | 975,788 | 218 | 1,455 | 33,854 | 1,011,315 | (30,338) | 980,977 | 44,066 |
| Ending balance | ₩ 51,955,586 | 184,760 | 69,769 | 50,162 | 52,260,277 | (57,010) | 52,203,267 | 6,255,637 |

51

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# *iv) Impairment information by credit risk of financial instruments (continued):*

(\*1) Credit quality of due from banks and loans was classified based on the internal credit rating as follows:

| Type of Borrower | Grade 1 | Grade 2 |
| --- | --- | --- |
| Governments/public institutions/central bank | OECD sovereign credit rating of 6 or above | OECD sovereign credit rating of below 6 |
| Retail | Internal credit rating of 5 or above | Internal credit rating of below 5 |
| Corporations/banks | Internal credit rating of BBB+ or above | Internal credit rating of below BBB+ |

(\*2) The due from banks at amortized cost includes cash equivalents.

(\*3) Provision for credit loss allowance for securities at fair value through other comprehensive income amounted to ₩7,301 million.

Impairment information related to credit risk of off-balance sheet accounts:

Impairment information related to credit risk of unused loan commitments and contribution commitments as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Credit risk exposure for 12-month expected credit loss | Provision for 12-month expected credit loss | Credit risk exposure for 12-month expected credit loss | Provision for 12-month expected credit loss |
| (In millions of won) |  |  |  |  |
| Grade 1 | ₩ 2,062,239 | 7 | 1,683,469 | 93 |

52

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# v) Concentration by industry sector

An analysis of concentration by industry sector of financial instrument, net of allowance, as of December 31, 2022 and 2021, are as follows:

|  | Finance and insurance | Manu- facturing | Retail and wholesale | Real estate and service | Construction service | Hotel and food service | Others | Retail | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Due from banks and loans at amortized cost (*): |  |  |  |  |  |  |  |  |  |
| Banks | W 778,195 | - | - | - | - | - | - | - | 778,195 |
| Retail |  |  |  |  |  |  |  |  |  |
| - Residential mortgage | - | - | - | - | - | - | - | 621,327 | 621,327 |
| - Others | - | - | - | - | - | - | - | 5,288,634 | 5,288,634 |
| Government/Public sector/Central bank | 160,270 | - | - | - | - | - | - | - | 160,270 |
| Corporations |  |  |  |  |  |  |  |  |  |
| - Conglomerate | 3,425 | 47,352 | - | - | - | - | 3,001 | - | 53,778 |
| - SMEs | 19,161 | 51,986 | - | 167,876 | - | - | 18,095 | - | 257,118 |
| - Special financing | 179,967 | 186,099 | - | 1,340,064 | 43,970 | - | 586,102 | - | 2,336,202 |
| - Others | - | - | - | - | - | 890 | 58,563 | - | 59,453 |
|  | 1,141,018 | 285,437 | - | 1,507,940 | 43,970 | 890 | 665,761 | 5,909,961 | 9,554,977 |
| Due from banks at fair value through profit or loss | 26,116 | - | - | - | - | - | - | - | 26,116 |
| Securities at fair value through profit or loss | 351,063 | - | - | 20,125 | - | - | 6,219,318 | - | 6,590,506 |
| Securities at fair value through other comprehensive income | 2,466,812 | 928,056 | 184,682 | 233,173 | 320,456 | 10,333 | 6,708,312 | - | 10,851,824 |
| Securities at amortized cost | 3,801,295 | - | - | 851,729 | 1,075,145 | - | 22,016,043 | - | 27,744,212 |
| Off-balance sheet accounts |  |  |  |  |  |  |  |  |  |
| Unused loan commitments | - | 37,000 | - | 272,827 | 61,758 | - | 64,606 | - | 436,191 |
| Contribution commitments | - | - | - | - | - | - | 1,626,048 | - | 1,626,048 |
|  | W 7,786,304 | 1,250,493 | 184,682 | 2,885,794 | 1,501,329 | 11,223 | 37,300,088 | 5,909,961 | 56,829,874 |

(*) Due from banks at amortized cost include cash equivalents.

53

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# v) Concentration by industry sector

An analysis of concentration by industry sector of financial instrument, net of allowance, as of December 31, 2022 and 2021, are as follows:

|  | 2021 |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Finance and insurance | Manufacturing | Retail and wholesale | Real estate and service | Construction service | Hotel and food service | Others | Retail | Total |
| Due from banks and loans at amortized cost (*): |  |  |  |  |  |  |  |  |  |
| Banks | W 859,707 | - | - | - | - | - | - | - | 859,707 |
| Retail |  |  |  |  |  |  |  |  |  |
| - Residential mortgage | - | - | - | - | - | - | - | 655,080 | 655,080 |
| - Others | - | - | - | - | - | - | - | 5,188,999 | 5,188,999 |
| Government/Public sector/Central bank | 162,725 | - | - | - | - | - | - | - | 162,725 |
| Corporations |  |  |  |  |  |  |  |  |  |
| - Conglomerate | 554,635 | 45,244 | - | - | - | - | 3,502 | - | 603,381 |
| - SMEs | 24,610 | 54,198 | - | 170,133 | - | - | 41,317 | - | 290,258 |
| - Special financing | 167,750 | 118,401 | - | 1,424,147 | 37,771 | - | 625,665 | - | 2,373,734 |
| - Others | - | 500 | - | - | - | 890 | 52,203 | - | 53,593 |
|  | 1,769,427 | 218,343 | - | 1,594,280 | 37,771 | 890 | 722,687 | 5,844,079 | 10,187,477 |
| Due from banks at fair value through profit or loss | 34,262 | - | - | - | - | - | - | - | 34,262 |
| Securities at fair value through profit or loss | 408,031 | 3,002 | - | 30,118 | - | - | 6,063,098 | - | 6,504,249 |
| Securities at fair value through other comprehensive income | 2,690,391 | 1,215,467 | 178,451 | 299,545 | 376,223 | 12,786 | 9,455,555 | - | 14,228,418 |
| Securities at amortized cost | 3,636,107 | - | - | 844,868 | 1,038,005 | - | 21,287,415 | - | 26,806,395 |
| Off-balance sheet accounts |  |  |  |  |  |  |  |  |  |
| Unused loan commitments | - | 22,000 | - | 244,333 | 84,883 | - | 109,475 | - | 460,691 |
| Contribution commitments | - | - | - | - | - | - | 1,222,778 | - | 1,222,778 |
|  | W 8,538,218 | 1,458,812 | 178,451 | 3,013,144 | 1,536,882 | 13,676 | 38,861,008 | 5,844,079 | 59,444,270 |

(*) Due from banks at amortized cost include cash equivalents.

54

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# *vi) Concentration by geographic location*

An analysis of concentration by geographic location for financial instrument, net of allowance, as of December 31, 2022 and 2021, are as follows:

| Classification | 2022 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Korea | USA | UK | Japan | Others | Total |
| Due from banks and loans at amortized cost |  |  |  |  |  |  |
| Banks | ₩ 606,963 | 39,371 | - | - | 131,861 | 778,195 |
| Retail |  |  |  |  |  |  |
| - Residential mortgage | 621,327 | - | - | - | - | 621,327 |
| - Others | 5,288,634 | - | - | - | - | 5,288,634 |
| Government/Public sector/Central bank | 160,270 | - | - | - | - | 160,270 |
| Corporations |  |  |  |  |  |  |
| - Conglomerate | 50,406 | 3,372 | - | - | - | 53,778 |
| - SMEs | 257,118 | - | - | - | - | 257,118 |
| - Special financing | 2,336,202 | - | - | - | - | 2,336,202 |
| - Others | 59,453 | - | - | - | - | 59,453 |
|  | 9,380,373 | 42,743 | - | - | 131,861 | 9,554,977 |
| Due from banks at fair value through profit or loss | - | 26,116 | - | - | - | 26,116 |
| Securities at fair value through profit or loss | 5,820,212 | 530,200 | 30,394 | 20,546 | 189,154 | 6,590,506 |
| Securities at fair value through other comprehensive income | 9,951,732 | 386,528 | 35,647 | - | 477,917 | 10,851,824 |
| Securities at amortized cost | 26,308,688 | 819,752 | - | - | 615,772 | 27,744,212 |
| Off-balance sheet accounts |  |  |  |  |  |  |
| Unused loan commitments | 436,191 | - | - | - | - | 436,191 |
| Contribution commitments | 1,072,660 | 528,271 | - | - | 25,117 | 1,626,048 |
|  | ₩ 52,969,856 | 2,333,610 | 66,041 | 20,546 | 1,439,821 | 56,829,874 |

55

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (b) Credit risk (continued)

# *vi) Concentration by geographic location (continued)*

An analysis of concentration by geographic location for financial instrument, net of allowance, as of December 31, 2022 and 2021, are as follows (continued):

| Classification | 2021 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Korea | USA | UK | Japan | Others | Total |
| Due from banks and loans at amortized cost |  |  |  |  |  |  |
| Banks | ₩ 677,162 | 122,641 | - | - | 59,904 | 859,707 |
| Retail |  |  |  |  |  |  |
| - Residential mortgage | 655,080 | - | - | - | - | 655,080 |
| - Others | 5,188,999 | - | - | - | - | 5,188,999 |
| Government/Public sector/Central bank | 162,725 | - | - | - | - | 162,725 |
| Corporations |  |  |  |  |  |  |
| - Conglomerate | 596,405 | 6,976 | - | - | - | 603,381 |
| - SMEs | 290,258 | - | - | - | - | 290,258 |
| - Special financing | 2,373,734 | - | - | - | - | 2,373,734 |
| - Others | 53,593 | - | - | - | - | 53,593 |
|  | 9,997,956 | 129,617 | - | - | 59,904 | 10,187,477 |
| Due from banks at fair value through profit or loss | - | 34,262 | - | - | - | 34,262 |
| Securities at fair value through profit or loss | 5,363,206 | 909,693 | 36,692 | 22,296 | 172,362 | 6,504,249 |
| Securities at fair value through other comprehensive income | 13,328,949 | 445,017 | 43,489 | - | 410,963 | 14,228,418 |
| Securities at amortized cost | 25,357,488 | 776,019 | - | - | 672,888 | 26,806,395 |
| Off-balance sheet accounts |  |  |  |  |  |  |
| Unused loan commitments | 460,691 | - | - | - | - | 460,691 |
| Contribution commitments | 1,130,624 | 23,710 | - | - | 68,444 | 1,222,778 |
|  | ₩ 55,638,914 | 2,318,318 | 80,181 | 22,296 | 1,384,561 | 59,444,270 |

56

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021
(In millions of won)

4. Financial risk management (continued)

(c) Market risk

i) Overview

Market risk from trading positions is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. Market risk exposures include securities, derivative financial transactions, assets and liabilities denominated in foreign currencies, and assets and liabilities of variable insurance.

ii) Limit and Risk Management Principles

ii-1) Limit Management

The market risk limit is approved by the Risk Management Committee reflecting the management plan and risk management plan at the end of each year and monitors the compliance on a daily basis. If the market risk exceeds 95% of the limit setting, the department in charge of risk management should notify each department in charge, and each department should establish risk management measures such as position and limit reduction and hedging transactions and report it to the risk management department.

ii-2) Risk Management Principle

The risk management principles of market risk are as follows:

- Securities and derivative financial instruments held for the purpose of obtaining short selling profit shall be limited and complied with.
- To manage market risk, a risk limit for each sector should be established and a stop loss limit should be used to control the risk to a certain extent.
- Transactions related to market risk must be assessed by market price.

ii-3) Stress test

The stress test is divided into a periodic analysis given a scenario model and an irregular analysis of early risk detection indicators when they reach a critical point. The stress test is conducted at least once a year and reported to the Risk Management Committee and management within three months after the analysis point.

In the case of regular analysis, the Company analyses the impact on net income and solvency amount through scenarios based on past historical events, divided into stock price, interest rate and exchange rate.

iii) Market risk management

Market risk measurement targets trading positions intentionally taken by financial institutions and foreign exchange positions by financial institutions for the purpose of obtaining trading gains from short-term trading, interest rates and price changes.

iii-1) Market risk measurement technique

VaR models for calculating market risks include partial valuation methods (variance-covariance models), full-value evaluation methods (historical simulation models), and Monte-Carlo simulation models. VaR was calculated using the variance-covariance model.

57

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (c) Market risk (continued)

# *iii) Market risk management (continued)*

# iii-2) Risk management and risk reduction policy

The Company regulates various limits, including the VaR limit, to manage market risk. Market risk limits are assigned on a daily basis by VaR to check business compliance. Risk management departments regularly monitor whether the operation department complies with these limits and report them to the management and risk management committee.

# iii-3) Foreign exchange risk

Since the Company holds foreign currency assets, it is exposed to the risk of dollar and other foreign currency-related exchange rate volatilities. Foreign exchange risks occur in relation to future forecast transactions, recognized assets, etc., and the exposure to risks caused by currency volatilities is managed within the limits prescribed by the approved policy using currency forward and currency swap agreements.

The Company calculates the exposure by converting the foreign currency assets and contractual amounts held at the exchange rate at the end of the reporting period, and hedges foreign currency assets to avoid currency risks arising from foreign investment. Accordingly, through currency swaps or currency forward contracts when investing in foreign bonds, the Company offsets any gains or losses arising from foreign exchange rate fluctuations that may occur during future investments.

# *iv) status of risk*

# iv-1) Trading position

The details of the VaR for the trading positions held by the Company as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  |
| --- | --- | --- | --- | --- |
|  | Average | Maximum | Minimum | December 31 |
| Interest rate risk | ₩ 2,341 | 5,181 | 1,102 | 1,418 |
| Stock price risk | 1,415 | 2,452 | 311 | 332 |
| Foreign exchange risk | 13,407 | 28,985 | 1,075 | 27,781 |
| Option volatility risk | 180 | 494 | 11 | 494 |
| ₩ | 17,343 | 37,112 | 2,499 | 30,025 |
|  | 2021 |  |  |  |
|  | Average | Maximum | Minimum | December 31 |
| Interest rate risk | ₩ 4,168 | 10,001 | 715 | 1,259 |
| Stock price risk | 1,156 | 1,991 | - | 1,332 |
| Foreign exchange risk | 8,683 | 13,115 | 4,995 | 10,461 |
| Option volatility risk | 1,253 | 2,829 | 26 | 47 |
| ₩ | 15,260 | 27,936 | 5,736 | 13,099 |

58

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021  
*(In millions of won)*

# **4. Financial risk management (continued)**

(c) Market risk (continued)

# *v) Composition of foreign currency assets and liabilities by currency*

The Company has foreign currency assets, etc., and thus is exposed to the risk of fluctuations in exchange rates related to the dollar and other foreign currencies. Foreign exchange risk occurs in relation to expected future transactions and recognized assets, and the degree of exposure to risk due to exchange rate fluctuations is managed within the limits prescribed by the approved policy using currency guidance and currency swap contracts.

The Company calculates the exposure by converting the foreign currency assets and the contract amount held at the exchange rate at the end of the reporting period and performs exchange hedging on foreign currency assets to avoid foreign exchange risks arising from overseas investment. Accordingly, when investing in overseas bonds, etc., the gains and losses from exchange rate fluctuations that may occur during the future investment period are offset through currency swaps or currency forward contracts.

59

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (c) Market risk (continued)

# v) Composition of foreign currency assets and liabilities by currency (continued)

Foreign currency denominated assets and liabilities as of December 31, 2022 and 2021, are as follows:

(In millions of USD, EUR, AUD, SEK, GBP and won)

|  | USD |  | EUR |  | AUD |  | SEK |  | GBP |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent |  |
| Assets: |  |  |  |  |  |  |  |  |  |  |  |
| Cash and due from banks at amortized cost | ₩ 28 | 35,109 | - | - | - | - | - | - | - | - | 35,109 |
| Due from banks at FVTPL | 21 | 26,116 | - | - | - | - | - | - | - | - | 26,116 |
| Securities at FVTPL | 534 | 677,028 | 69 | 93,266 | - | 275 | - | - | - | - | 770,569 |
| Financial assets at FVOCI | 383 | 485,065 | 211 | 284,538 | 204 | 175,477 | - | - | 23 | 35,647 | 980,727 |
| Securities at amortized cost | 923 | 1,170,016 | 72 | 96,701 | - | - | 4,480 | 542,814 | - | - | 1,809,531 |
| Receivables at amortized cost | 92 | 117,062 | 4 | 5,696 | 2 | 1,446 | 98 | 11,819 | - | 442 | 136,465 |
|  | ₩ 1,981 | 2,510,396 | 356 | 480,201 | 206 | 177,198 | 4,578 | 554,633 | 23 | 36,089 | 3,758,517 |
| Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
| Debentures | ₩ 350 | 443,505 | - | - | - | - | - | - | - | - | 443,505 |
| Other financial liabilities | 3 | 4,334 | - | - | - | - | - | - | - | - | 4,334 |
|  | ₩ 353 | 447,839 | - | - | - | - | - | - | - | - | 447,839 |
| On-balance, net exposure | ₩ 1,628 | 2,062,557 | 356 | 480,201 | 206 | 177,198 | 4,578 | 554,633 | 23 | 36,089 | 3,310,678 |
| Off-balance derivative net exposure (*) | (1,637) | (2,074,060) | (391) | (528,584) | (392) | (336,494) | (5,979) | (724,486) | (26) | (38,956) | (3,702,580) |
| Net position | ₩ (9) | (11,503) | (35) | (48,383) | (186) | (159,296) | (1,401) | (169,853) | (3) | (2,867) | (391,902) |

(*) Derivative contract amount

60

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021

# **4. Financial risk management (continued)**

# (c) Market risk (continued)

# v) Composition of foreign currency assets and liabilities by currency (continued)

Foreign currency denominated assets and liabilities as of December 31, 2022 and 2021, are as follows (continued)

(In millions of USD, EUR, AUD, SEK, GBP and won)

|  | 2021 |  |  |  |  |  |  |  |  |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | USD |  | EUR |  | AUD |  | SEK |  | GBP |  |  |
|  | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent | Foreign currency | KRW equivalent |  |
| Assets: |  |  |  |  |  |  |  |  |  |  |  |
| Cash and due from banks at amortized cost | ₩ 39 | 46,539 | - | 298 | - | - | - | - | - | - | 46,837 |
| Due from banks at FVTPL | 29 | 34,262 | - | - | - | - | - | - | - | - | 34,262 |
| Securities at FVTPL | 982 | 1,164,349 | 36 | 49,074 | 1 | 452 | - | - | - | - | 1,213,875 |
| Financial assets at FVOCI | 393 | 466,012 | 161 | 215,611 | 295 | 253,278 | - | - | 27 | 43,489 | 978,390 |
| Securities at amortized cost | 947 | 1,122,380 | 52 | 69,282 | - | - | 4,480 | 587,028 | - | - | 1,778,690 |
| Receivables at amortized cost | 81 | 95,246 | 2 | 2,499 | 2 | 1,447 | 68 | 8,967 | - | 463 | 108,622 |
|  | ₩ 2,471 | 2,928,788 | 251 | 336,764 | 298 | 255,177 | 4,548 | 595,995 | 27 | 43,952 | 4,160,676 |
| Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
| Debentures | ₩ 350 | 414,820 | - | - | - | - | - | - | - | - | 414,820 |
| Other financial liabilities | 2 | 2,137 | - | - | - | - | - | - | - | - | 2,137 |
|  | ₩ 352 | 416,957 | - | - | - | - | - | - | - | - | 416,957 |
| On-balance, net exposure | ₩ 2,119 | 2,511,831 | 251 | 336,764 | 298 | 255,177 | 4,548 | 595,995 | 27 | 43,952 | 3,743,719 |
| Off-balance derivative net exposure (*) | (1,890) | (2,240,289) | (222) | (298,620) | (284) | (243,714) | (4,480) | (587,013) | (26) | (40,807) | (3,410,443) |
| Net position | ₩ 229 | 271,542 | 29 | 38,144 | 14 | 11,463 | 68 | 8,982 | 1 | 3,145 | 333,276 |

(*) Derivative contract amount

61

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021
(In millions of won)

4. Financial risk management (continued)

(d) Interest rate risk

i) Overview

Interest rate risk is economic loss risk arising from future changes in market interest rates and differences in the maturity of assets and liabilities and refers to the negative effects of changes in the present value of future cash flows from assets and liabilities on the net asset value of insurance companies.

ii) Limit and risk management principles

ii-1) Limit management

The interest rate risk limit is approved by the Risk Management Committee, reflecting the management plan and risk management plan at the end of each year, and monitors compliance with the monthly limit. If the interest rate risk exceeds 95% of the limit, the department in charge of risk management must notify each department in charge, and each department must establish and report risk management measures such as changes in position and portfolio to the risk management department.

ii-2) Risk management principle

The risk management principles of interest rate risk are as follows:

- Properly distribute interest rate related assets and liabilities by product and set limits
- Considering stability, liquidity and profitability in interest rate risk transactions

iii) Interest rate risk management in non-trading positions

The Company seeks to secure stable profits by managing the decrease in net asset value and fluctuations in profits in the financial sector, which will be caused by changes in interest rates.

iii-1) Interest Rate VaR (Value at Risk)

Interest rate VaR is the maximum amount of loss the Company can incur in a given period of time if adverse market price changes occur within a certain confidence interval by predicting future distribution of market prices, such as stock prices and exchange rates, and is expected to reduce the maximum net asset value over the next year due to changes in interest rates.

Interest rate VaR is a technique to assess and manage the amount of maximum losses probabilistically by identifying the fluctuation distribution of NPVs caused by a number of interest rate synergies, and is an economic loss risk caused by changes in future market rates and differences in the maturity of assets and liabilities. Interest-bearing assets exclude financial assets acquired for short-selling purposes, assets that receive only commissions without interest, and assets that are fixed under the asset soundness category, and interest-bearing liabilities are the sum of the premium and non-excess premium reserves.

For the year ended December 31, 2022, the VaR for the non-trading position held by the Company is ₩ 892,080 million, an increase of ₩ 376,029 million in comparison to December 31, 2021.

62

# SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021
(In millions of won)

# 4. Financial risk management (continued)

# (e) Liquidity risk

# i) Overview

Liquidity risk refers to the risk that assets and liabilities are subject to mismatches or failure to respond to unexpected fund outflows. The liquidity risk is calculated using liquidity liabilities, such as the amount of three-month payment insurance, and liquidity assets under three months. Liquidity liabilities are calculated based on a probabilistic scenario in which payments and cash outflows (such as business expenses) are calculated, and liquidity assets are calculated by considering the amount applied to the FSS-based liquidity ratio and future cash inflows (such as premium income) by probabilistic scenarios.

# ii) Threshold and risk management principle

# ii-1) Threshold management

The liquidity risk threshold is implemented with the approval of the Risk Management Committee by reflecting the management plan and risk management plan for the upcoming year at the end of each year, and compliance with the threshold is monitored monthly. If the liquidity risk exceeds 95% of the threshold, the department in charge of risk management shall notify each department, and departments informed shall establish risk management measures such as changes in position and portfolio and report them to the risk management department.

ii-2) The risk management principles of liquidity risk are as follows.

- Retain management strategies including liquidity risk management goals, management policies, and internal control systems
- Establish a framework for calculation and management of an actual liquidity gap that reflects actual maturity of assets and liabilities, changes in consumer behaviour (such as overdue days), external transactions, new handling and procurement amount
- Manage risks by conducting a liquidity forecast analysis on a regular basis, properly diversifying the procurement and operation of the fund, in order to avoid concentration at a certain point of time
- Observe liquidity risk limit
- Establish contingency plans in case of a liquidity crisis

The Company establishes a fund operation plan to defend against liquidity risk in the event of fund operation, taking into account the matching ratio with liquidity liabilities through the monthly analysis of the capital account balance. In addition, the Company prepares for a liquidity crisis by setting up a contingency plan and minimizing the losses caused by the mismatch in the financial dates of the asset liabilities by taking into account not only the expected funding needs per currency but also the unexpected funding needs.

63

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (e) Liquidity risk (continued)

*iii) Contractual maturities for financial instruments including cash flows of principal and interest and off-balance sheet accounts.*

Contractual maturities for financial instruments including cash flows of principal and interest and off-balance sheet accounts as of December 31, 2022 and 2021, are as follows:

|  |  | 2022 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Less than 1 month | 1~3 months | 3~6 months | 6 months ~ 1 year | 1~5 years | More than 5 years | Total |
| Non-derivative financial assets: |  |  |  |  |  |  |  |  |
| Assets: |  |  |  |  |  |  |  |  |
| Cash and due from banks at amortized cost | ₩ | 358,757 | 2,612 | 3,018 | 7,869 | 82,712 | 711,478 | 1,166,446 |
| Due from banks at fair value through profit or loss |  | 26,116 | - | - | - | - | - | 26,116 |
| Securities at fair value through profit or loss |  | 1,174,790 | - | 2,513 | 16,274 | 246,504 | 5,247,726 | 6,687,807 |
| Financial assets at fair value through other comprehensive income |  | 10,851,824 | - | - | - | - | 50,275 | 10,902,099 |
| Securities at amortized cost |  | 58,603 | 195,285 | 161,677 | 462,878 | 5,189,619 | 34,291,166 | 40,359,228 |
| Loans at amortized cost |  | 97,748 | 120,844 | 160,033 | 630,090 | 5,147,751 | 4,162,974 | 10,319,440 |
| Receivables at amortized cost |  | 136,072 | 11,002 | 6,279 | 328,942 | 86,833 | 537,686 | 1,106,814 |
|  | ₩ | 12,703,910 | 329,743 | 333,520 | 1,446,053 | 10,753,419 | 45,001,305 | 70,567,950 |
| Non-derivative financial liabilities: |  |  |  |  |  |  |  |  |
| Borrowings | ₩ | - | 10,000 | - | - | - | - | 10,000 |
| Debentures |  | - | 2,015 | 213,326 | 454,866 | - | - | 670,207 |
| Other financial liabilities(*1) |  | 152,960 | 165,976 | 6,955 | 65,871 | 5,878 | 2,651 | 400,291 |
| Lease liabilities(*1) |  | 2,889 | 5,629 | 8,009 | 14,796 | 80,556 | 3,502 | 115,381 |
|  | ₩ | 155,849 | 183,620 | 228,290 | 535,533 | 86,434 | 6,153 | 1,195,879 |
| Derivatives: |  |  |  |  |  |  |  |  |
| Cash inflows(*2) | ₩ | 51,197 | 171,604 | 425,836 | 600,648 | 2,578,988 | - | 3,828,273 |
| Cash outflows(*2) |  | (47,708) | (182,923) | (425,374) | (783,815) | (4,027,933) | - | (5,467,753) |
|  | ₩ | 3,489 | (11,319) | 462 | (183,167) | (1,448,945) | - | (1,639,480) |
| Off-balance sheet accounts: |  |  |  |  |  |  |  |  |
| Unused loan commitments | ₩ | 436,191 | - | - | - | - | - | 436,191 |
| Contribution commitments |  | 1,626,048 | - | - | - | - | - | 1,626,048 |
|  | ₩ | 2,062,239 | - | - | - | - | - | 2,062,239 |

(*1) It is classified according to the maturity of the contractual cash flows before the discount of lease liabilities and other financial liabilities.

(*2) Hedge derivatives are contractual amounts, including principal and interest, and trading derivatives are carrying amounts.

64

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **4. Financial risk management (continued)**

# (e) Liquidity risk (continued)

*iii) Contractual maturities for financial instruments including cash flows of principal and interest and off-balance sheet accounts (continued).*

Contractual maturities for financial instruments including cash flows of principal and interest and off-balance sheet accounts as of December 31, 2022 and 2021, are as follows (continued):

|  | 2021 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Less than 1 month | 1~3 months | 3~6 months | 6 months ~ 1 year | 1~5 years | More than 5 years | Total |
| Non-derivative financial assets: |  |  |  |  |  |  |  |
| Assets: |  |  |  |  |  |  |  |
| Cash and due from banks at amortized cost | ₩ 490,412 | 2,612 | 3,018 | 7,869 | 76,856 | 1,217,331 | 1,798,098 |
| Due from banks at fair value through profit or loss | 34,261 | - | - | - | - | - | 34,261 |
| Securities at fair value through profit or loss | 1,154,793 | - | - | - | 190,791 | 5,274,368 | 6,619,952 |
| Financial assets at fair value through other comprehensive income | 14,228,418 | - | - | - | - | 54,531 | 14,282,949 |
| Securities at amortized cost | 38,026 | 151,793 | 208,265 | 266,995 | 4,438,796 | 34,528,317 | 39,632,192 |
| Loans at amortized cost | 74,684 | 146,151 | 269,625 | 444,799 | 5,050,636 | 4,292,615 | 10,278,510 |
| Receivables at amortized cost | 205,740 | 10,065 | 9,170 | 221,816 | 55,738 | 513,034 | 1,015,563 |
|  | ₩ 16,226,334 | 310,621 | 490,078 | 941,479 | 9,812,817 | 45,880,196 | 73,661,525 |
| Non-derivative financial liabilities: |  |  |  |  |  |  |  |
| Borrowings | ₩ - | - | - | - | - | - | - |
| Debentures | - | 2,015 | 12,596 | 14,611 | 640,116 | - | 669,338 |
| Other financial liabilities(*1) | 83,696 | 102,242 | 1,870 | 156,344 | - | 188 | 344,340 |
| Lease liabilities(*1) | 1,860 | 3,201 | 4,744 | 8,680 | 48,920 | 67,488 | 134,893 |
|  | ₩ 85,556 | 107,458 | 19,210 | 179,635 | 689,036 | 67,676 | 1,148,571 |
| Derivatives: |  |  |  |  |  |  |  |
| Cash inflows(*2) | ₩ 58,057 | 205,087 | 438,089 | 733,729 | 1,904,628 | 20,779 | 3,360,369 |
| Cash outflows(*2) | (57,525) | (207,889) | (456,009) | (746,675) | (2,594,644) | (23,341) | (4,086,083) |
|  | ₩ 532 | (2,802) | (17,920) | (12,946) | (690,016) | (2,562) | (725,714) |
| Off-balance sheet accounts: |  |  |  |  |  |  |  |
| Unused loan commitments | ₩ 460,691 | - | - | - | - | - | 460,691 |
| Contribution commitments | 1,222,778 | - | - | - | - | - | 1,222,778 |
|  | ₩ 1,683,469 | - | - | - | - | - | 1,683,469 |

(*1) It is classified according to the maturity of the contractual cash flows before the discount of lease liabilities and other financial liabilities.

(*2) Hedge derivatives are contractual amounts, including principal and interest, and trading derivatives are carrying amounts.

65

# SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021
(In millions of won)

# 5. Insurance risk management

# (a) Overview

# i) Insurance risk and reinsurance

Insurance risk is the likelihood of an insurance event occurring and the uncertainty as to the total amount and timing of benefits paid as a result of the event. The main risk covered by insurance contracts is the risk that the actual claim or benefit payment will exceed the accumulated liability. This risk can occur for the following reasons:

1 Frequency risk: Possibility that the number of occurrences of the insurance event is different from the expected number
2 Severity risk: The cost of an incident may be different from the expected cost level

Experience shows that more or more similar insurance contracts are less likely to have an unusual effect from some contracts, and the Company forms a sufficiently diversified group of contracts in consideration of this when acquiring the contracts.

Insurance risk includes a lack of risk diversification and relates to geographical location and the nature of the policyholder as well as to the diversification of risk forms or sizes.

If the insurance contract covers death, the catastrophe affects the frequency the most and can affect the frequency of death earlier than expected due to a wide range of causes such as eating habits, smoking, and exercise habits. And if the coverage is survival, medical technology and social conditions can increase the survival rate. The frequency may also be affected by excessive concentration in the coverage area.

Insurance accidents in life insurance include not only the death of the insured (insured) but also survival, disability and hospitalization.

The Company basically classifies the Company's insurance products into individual insurance and group insurance according to the policyholder. Group insurance means a contract under which the insured belongs to a group of a certain size or larger and in which the policyholder is the representative of the Company or organization. The group insurance can be divided into savings and protections. Protection insurance means insurance in which the sum of benefits paid for survival at the base age does not exceed the premium already paid; savings insurance is defined as insurance, except for protection insurance, in which the sum of benefits paid for survival exceeds the premium already paid. Individual insurance can be classified into death insurance in which the insured's death is insured, survival insurance in which the life is insured for a certain period of time, and endowment insurance.

Life insurance products can also be divided into floating rates, guaranteed variable rates, interest-sensitive, and variable types.

In the guaranteed fixed interest type, since the expected rate does not change from the time the policyholder enters into the contract to the end of the insurance period, the Company assumes the interest rate risk if the asset management yield or market interest rate is lower than the expected rate. Floating interest rate type divides the net insurance premium into the guaranteed portion and the reserve portion, so that the guaranteed portion is applied with the predetermined expected rate, and the reserve portion changes the reserve rate of policy reserve according to asset management yield, and some hedging on interest rate risk is feasible.

The Company uses acquisition strategies and reinsurance strategies to manage the uncertainty of the total amount and timing of insurance claims paid out as a result of an insured event.

66

SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021
(In millions of won)

5. Insurance risk management (continued)

(a) Overview (continued)

i) Insurance risk and reinsurance (continued)

i-1) Acquisition Strategy

Acquisition strategy means diversifying the type of risk or the level of benefits that are acquired. For example, a company can balance mortality and survival risks. In addition, the selection of policyholders through regular check-ups is one of the major acquisition strategies.

i-2) Reinsurance Strategy

The risk to be ceded by the Company is based on the acquired insurance contract, which can be the total amount of risk or risk per contract on a per capita basis or per contract basis. In principle, the reinsurance method provides the risk premium excess reinsurance, but other methods may be used within the scope of the relevant laws as required. The degree of reinsurance held by the Company shall be determined by considering the Company's assets, contract conditions, risk level, and technology for selecting the contract.

Insurance risk can also be affected by the policyholder's right to terminate the contract or exercise annuity conversion rights to reduce or not pay the full premium. As a result, insurance risks may be affected by the policyholder's actions and decisions. The Company's insurance risk can be estimated on the assumption that the policyholder is reasonable. For example, a person who is worse than a person in good health would have less intention of terminating insurance that guarantees death. These factors are also reflected in the assumptions about the Company's insurance liability.

ii) Discretionary participation feature

The discretionary participation feature is a contractual right to receive additional benefits which have the following characteristics in addition to the unconditional rights of the policyholder or investor, which fulfils all three requirements below. Insurance premiums for investment contracts without discretionary participation feature are recognized as deposits, and premiums for investment contracts with discretionary participation feature are recognized as profit or loss.

1 It constitutes a significant portion of the total payments in the contract.
2 The amount or timing is determined at the discretion of the issuer under the contract.
3 The contract is based on one or more of the following:
- The performance arising from specific contract groups or specific contract types;
- Realized or unrealized return on investment arising from the specific asset group held by the issuer; or
- Profit or loss of the entity, fund or other entity that issued the contract;

The Company's participating contract meets all three of the above requirements and includes a discretionary participation feature.

If the actual base rate matches with the expected base rate assumed upon calculation of the insurance premium of the Company, income and expenses are balanced over the insurance period, that the premiums do not fall short. In practice, however, the expected risk, expected interest rate, and projected expense ratio applied when calculating premiums will differ from the actual rate where the interest rate or expense ratio changes due to changes in risk rate or economic situation. These differences constitute the Company's profit or losses and, depending on the source, these may consist of mortality risk, interest rate, interest rate risk, and expense rate.

67

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021  
(In millions of won)

# **5. Insurance risk management (continued)**

# (a) Overview (continued)

# *ii) Discretionary participation feature (continued)*

Compared to contracts without discretionary participation feature, in case of contracts with discretionary participation features, the sources of profit or loss below are shared between the policyholders and the Company, thereby reducing the risk.

# 1 Gain or losses on mortality risk

It is caused by the difference between the expected risk rate and the actual risk rate. In case of death insurance, if the actual mortality rate is lower than the expected mortality rate, there is a risk difference gain and vice versa.

# 2 Gain or losses on interest rate risk

It is caused by the difference between the expected interest rate and the actual interest rate. If the actual asset management return is higher than the expected interest rate, interest rate difference is generated and vice versa.

# 3 Gain or losses on expense rate risk

It is caused by the difference between the operating expense and the actual expense. If the actual expense is lower than the operating expense, the difference in expense is incurred, and vice versa.

As described above, if the expected base rate used by the Company to calculate the premium is different from the actual, the profits generated from the settlement must be refunded to the policyholder because the profits generated are taken in the calculation of premiums, and the dividend paid to the policyholder is distinguished from the dividend paid to shareholders.

The Company first accumulates policy reserves at the end of each reporting period, and then divides the remainder into gain or losses from participating and non-participating insurance contracts and gain or losses on management of the capital account. Gain or losses from non-participating insurance and management of the capital account are treated as the shareholder's interest, shareholder's interest for the gain or losses on participating insurance is less than 10$^{th}$ of 100$^{th}$, and the remaining portion shall be treated as the policyholder's interest. Policyholder's shares may not be used or accumulated for purpose other than the financial resources for policyholder dividends and the purpose of accumulating excess participating policyholder dividend reserve.

Policyholder dividends represent amounts payable to policyholders due to interest rate difference, long-term duration, mortality rate difference, and expense rate difference, and the reserve for policyholder dividends is divided into policyholder dividend reserve and excess participating policyholder dividend reserve. Excess participating policyholder dividend reserve is the amount to be accumulated in the total amount to be used for future policyholder dividends if there is surplus after accumulating the reserve for loss from participating insurance and the policyholder dividend reserve from the policyholders' interest of participating interest in the year.

The policyholder dividend reserve is a defined dividend reserve that determines the amount to be paid for each policyholder, whereas the amount of excess participating policyholder dividend reserve is not confirmed for each policyholder. The Company should first use the excess participating policyholder dividend reserve accumulated in gross amount prior to the year and the excess participating policyholder dividend reserve accumulated should be used as the policyholder dividend within 5 years from the end of the year.

68

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **17. Property and equipment**

(a) Details of property and equipment as of December 31, 2022 and 2021, are as follows:

|  |  | 2022 |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  | Acquisition cost | Accumulated depreciation | Accumulated Impairment | Carrying value |
| Land | ₩ | 12,877 | - | - | 12,877 |
| Buildings |  | 36,828 | (8,256) | (7,088) | 21,484 |
| Structure |  | 3,894 | (2,405) | (506) | 983 |
| Rental property(*) |  | 39,685 | (25,830) | - | 13,855 |
| Equipment(*) |  | 113,172 | (81,095) | - | 32,077 |
| Other assets |  | 140 | - | - | 140 |
|  | ₩ | 206,596 | (117,586) | (7,594) | 81,416 |

(*) The accumulated depreciation of the rental properties and equipment includes the amount related to government subsidies.

|  |  | 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  | Acquisition cost | Accumulated depreciation | Accumulated Impairment | Carrying value |
| Land | ₩ | 12,877 | - | - | 12,877 |
| Buildings |  | 36,755 | (7,705) | (7,088) | 21,962 |
| Structure |  | 3,894 | (2,270) | (506) | 1,118 |
| Rental property |  | 54,359 | (36,523) | - | 17,836 |
| Equipment |  | 121,041 | (83,257) | - | 37,784 |
| Other assets |  | 2,146 | - | - | 2,146 |
|  | ₩ | 231,072 | (129,755) | (7,594) | 93,723 |

(*) The accumulated depreciation of the rental properties and equipment includes the amount related to government subsidies.

109

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **17. Property and equipment (continued)**

(b) Changes in property and equipment for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Beginning balance | Acquisitions | Disposals | Other changes(*) | Deprecia- tion | Ending balance |
| Land | ₩ | 12,877 | - | - | - | - | 12,877 |
| Buildings |  | 21,962 | 74 | - | - | (552) | 21,484 |
| Structure |  | 1,118 | - | - | - | (135) | 983 |
| Rental property |  | 17,836 | 1,600 | (473) | - | (5,108) | 13,855 |
| Equipment |  | 37,784 | 4,644 | (350) | 2,984 | (12,985) | 32,077 |
| Other assets |  | 2,146 | 965 | (61) | (2,910) | - | 140 |
|  | ₩ | 93,723 | 7,283 | (884) | 74 | (18,780) | 81,416 |

(*) Assets under construction and intangible assets have been replaced to equipment.

|  |  | 2021 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Beginning balance | Acquisitions | Disposals | Other changes(*) | Impair- ment | Deprecia- tion | Business combination | Ending balance |
| Land | ₩ | 12,877 | - | - | - | - | - | - | 12,877 |
| Buildings |  | 29,782 | 3 | - | - | (7,088) | (735) | - | 21,962 |
| Structure |  | 1,819 | - | - | - | (506) | (195) | - | 1,118 |
| Rental property |  | 4,998 | 8,726 | (300) | - | - | (3,742) | 8,154 | 17,836 |
| Vehicle |  | 58 | - | (54) | - | - | (4) | - | - |
| Equipment |  | 17,908 | 16,061 | (261) | 2,306 | - | (10,619) | 12,389 | 37,784 |
| Other assets |  | 2,176 | 1,820 | - | (2,306) | - | - | 456 | 2,146 |
|  | ₩ | 69,618 | 26,610 | (615) | - | (7,594) | (15,295) | 20,999 | 93,723 |

(*) Assets under construction have been replaced to equipment.

(c) As of December 31, 2022, there are no property and equipment provided as collateral.

110

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **18. Intangible assets**

(a) Details of intangible assets as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  | 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Acquisition costs | Accumulated amortization | Accumulated impairment loss | Carrying amount | Acquisition costs | Accumulated amortization | Accumulated impairment loss | Carrying amount |
| Development cost(*) | ₩ 448,612 | (226,006) | - | 222,606 | 234,265 | (181,840) | - | 52,425 |
| Software(*) | 120,050 | (84,644) | - | 35,406 | 96,781 | (74,588) | - | 22,193 |
| Membership | 6,602 | - | (627) | 5,975 | 7,215 | - | (627) | 6,588 |
| Others | 5,313 | - | - | 5,313 | 133,495 | (49) | - | 133,446 |
|  | ₩ 580,577 | (310,650) | (627) | 269,300 | 471,756 | (256,477) | (627) | 214,652 |

(*) It includes the acquired cost and accumulated depreciation of the development cost and software related to government subsidies.

(b) Changes in intangible assets for the years ended December 31, 2022 and 2021, are as follows:

| Investees | 2022 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Beginning balance | Acquisition | Disposal | Other changes (*) | Impairment loss | Amortization | Ending balance |
| Development cost | ₩ 52,425 | 5,088 | (108) | 209,982 | - | (44,781) | 222,606 |
| Software | 22,193 | 2,167 | (126) | 21,579 | - | (10,407) | 35,406 |
| Membership | 6,588 | - | (600) | - | (13) | - | 5,975 |
| Others | 133,446 | 104,220 | (717) | (231,635) | - | (1) | 5,313 |
|  | ₩ 214,652 | 111,475 | (1,551) | (74) | (13) | (55,189) | 269,300 |

(*) Intangible assets under development, reclassified to development cost, software, and tangible assets.

| Investees | 2021 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Beginning balance | Acquisition | Disposal | Other changes (*) | Impairment loss | Amortization | Business combination | Ending balance |
| Development cost | ₩ 35,849 | 316 | - | 25,157 | - | (23,219) | 14,322 | 52,425 |
| Software | 13,778 | 7,354 | - | 1,451 | - | (6,946) | 6,556 | 22,193 |
| Membership | 4,127 | 921 | (1,195) | - | 296 | - | 2,439 | 6,588 |
| Others | 28,016 | 91,343 | - | (26,608) | - | (1) | 40,696 | 133,446 |
|  | ₩ 81,770 | 99,934 | (1,195) | - | 296 | (30,166) | 64,013 | 214,652 |

(*) Intangible assets under development, reclassified to development cost, and software.

111

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **19. Insured assets**

The details of insurance subscriptions for cash, securities and property, and equipment of the Company as of the December 31, 2022 and 2021, are as follows:

| Insurance type | Insured assets | Insurance company | Amount covered |  |
| --- | --- | --- | --- | --- |
|  |  |  | 2022 | 2021 |
| Comprehensive insurance for financial institutions | Electronic financial transaction | Meritz Fire & Marine Insurance Co., Ltd., etc | ₩ 500 | 500 |
| Comprehensive property insurance | Comprehensive property risk | Samsung Fire & Marine |  |  |
| Executive Liability Insurance | Mechanical risk | Insurance Co., Ltd. | 126,933 | 127,444 |
|  | Directors' and officers | Meritz Fire & Marine |  |  |
|  |  | Insurance Co., Ltd., etc | 50,000 | 50,000 |
| Other insurance 1 | Personal information leakage | Meritz Fire & Marine |  |  |
|  |  | Insurance Co., Ltd., etc | 5,000 | 5,000 |
| Other insurance 2 | Cash, securities | MG Non-life Insurance Co., Ltd. | 480 | 480 |
| Other insurance 3 | Gas accident | Samsung Fire & Marine |  |  |
|  |  | Insurance Co., Ltd. | - | 380 |
| Other insurance 4 | Elevator accident | Samsung Fire & Marine |  |  |
|  |  | Insurance Co., Ltd. | - | 90 |
|  |  |  | ₩ 182,913 | 183,894 |

112

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **20. Investment properties**

(a) Investment properties as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  | 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Acquisition cost | Accumulated depreciation | Book value | Acquisition cost | Accumulated depreciation | Book value |
| Land | ₩ 6,032 | - | 6,032 | 6,032 | - | 6,032 |
| Buildings | 10,649 | (2,071) | 8,578 | 10,649 | (1,859) | 8,790 |
|  | ₩ 16,681 | (2,071) | 14,610 | 16,681 | (1,859) | 14,822 |

(b) Changes in investment properties for the years ended December 31, 2022 and 2021, are as follows:

| Investees | 2022 |  |  |
| --- | --- | --- | --- |
|  | Beginning balance | Depreciation | Ending balance |
| Land | ₩ 6,032 | - | 6,032 |
| Buildings | 8,790 | (212) | 8,578 |
|  | ₩ 14,822 | (212) | 14,610 |

| Investees | 2021 |  |  |
| --- | --- | --- | --- |
|  | Beginning balance | Depreciation | Ending balance |
| Land | ₩ 6,032 | - | 6,032 |
| Buildings | 9,002 | (212) | 8,790 |
|  | ₩ 15,034 | (212) | 14,822 |

(c) Income and expenses on investment property for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Rental income | ₩ 1,152 | 1,156 |
| Operating expenses | 212 | 212 |

(d) Fair value measurement

i) The fair value of investment property as of December 31, 2022 and 2021 is as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Land | ₩ 7,386 | 7,247 |
| Buildings | 10,286 | 10,094 |
|  | ₩ 17,672 | 17,341 |

The fair value of an investment property is determined by the value measured by an independent assessment agency that has recently assessed a similar property in the area of the investment property being assessed, which is classified as Level 3 fair value based on inputs used in the valuation technique.

113

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **20. Investment properties (continued)**

(d) Fair value measurement (continued)

ii) Valuation techniques and input variables used to measure the fair value of investment property are as follows.

|  | Valuation techniques | 2022 | 2021 | Input variables |
| --- | --- | --- | --- | --- |
| Land | Public Land Price Based | ₩ 7,386 | 7,247 | Public land price, transaction-related prices |
| Buildings | Acquisition cost Based | 10,286 | 10,094 | Transactions-related prices |
|  |  | ₩ 17,672 | 17,341 |  |

# **21. Deferred acquisition cost**

Changes in deferred acquisition cost by insurance type for the years ended December 31, 2022 and 2021, are as follows:

|  | Beginning balance | 2022 |  |  | Amortiza- tion | Ending balance |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | Acquisition cost incurred |  |  |  |  |
|  |  | Cost | Expensed | Deferral |  |  |
| Individual insurance |  |  |  |  |  |  |
| Survival insurance | ₩ 28,503 | 10,555 | (4,900) | 5,655 | (15,503) | 18,655 |
| Mortality insurance | 988,986 | 648,408 | (254,187) | 394,221 | (430,717) | 952,490 |
| Endowment insurance | 19,897 | 21,394 | (17,398) | 3,996 | (8,120) | 15,773 |
|  | 1,037,386 | 680,357 | (276,485) | 403,872 | (454,340) | 986,918 |
| Group insurance |  |  |  |  |  |  |
| Protection type | 394 | 136 | (20) | 116 | (166) | 344 |
|  | ₩ 1,037,780 | 680,493 | (276,505) | 403,988 | (454,506) | 987,262 |

|  | Beginning balance | Business combination | 2021 |  |  | Amortiza- tion | Ending balance |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | Acquisition cost incurred |  |  |  |  |
|  |  |  | Cost | Expensed | Deferral |  |  |
| Individual insurance |  |  |  |  |  |  |  |
| Survival insurance | ₩ 31,896 | 16,086 | 8,386 | (2,740) | 5,646 | (25,125) | 28,503 |
| Mortality insurance | 616,806 | 445,962 | 539,990 | (246,003) | 293,987 | (367,769) | 988,986 |
| Endowment insurance | 940 | 16,420 | 13,303 | (5,882) | 7,421 | (4,884) | 19,897 |
|  | 649,642 | 478,468 | 561,679 | (254,625) | 307,054 | (397,778) | 1,037,386 |
| Group insurance |  |  |  |  |  |  |  |
| Protection type | 590 | - | 170 | (64) | 106 | (302) | 394 |
|  | ₩ 650,232 | 478,468 | 561,849 | (254,689) | 307,160 | (398,080) | 1,037,780 |

114

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives**

# (a) Notional amount

The notional amount of derivatives instruments as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Equity related derivatives: |  |  |
| Over the counter: |  |  |
| Currency forward | ₩ 65,553 | 25,919 |
| Equity options | 337,543 | 196,029 |
|  | 403,096 | 221,948 |
| Hedges: |  |  |
| Fair value hedges: |  |  |
| Equity futures | ₩ - | 122,073 |
| Currency forward | 106,908 | 364,681 |
| Currency swaps | - | 12,341 |
| Cash flow hedges: |  |  |
| Currency forward | 1,105,080 | 1,080,692 |
| Currency swaps | 2,478,262 | 1,856,328 |
| Interest rate forward | 1,574,675 | 620,658 |
|  | 5,264,925 | 4,056,773 |
|  | ₩ 5,668,021 | 4,278,721 |

115

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

# (b) Fair value

The fair values of derivatives held as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Assets | Liabilities | Assets | Liabilities |
| Equity related derivatives: |  |  |  |  |
| Over the counter: |  |  |  |  |
| Currency forward | ₩ 3,066 | 1,148 | 1,310 | - |
| Equity options | 1,573 | - | 47 | - |
|  | 4,639 | 1,148 | 1,357 | - |
| Hedges: |  |  |  |  |
| Fair value hedges: |  |  |  |  |
| Currency forward | ₩ 2,020 | 126 | 349 | 8,995 |
| Currency swaps | - | - | - | 1,125 |
| Cash flow hedges: |  |  |  |  |
| Currency forward | 26,167 | 42,577 | 177 | 34,696 |
| Currency swaps | 53,565 | 62,047 | 3,248 | 88,546 |
| Interest rate forward | 5,546 | 209,522 | 757 | 7,784 |
|  | 87,298 | 314,272 | 4,531 | 141,146 |
|  | ₩ 91,937 | 315,420 | 5,888 | 141,146 |

(c) Gains or losses related to derivatives for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Gain related to derivatives |  |  |
| Gain on sale | ₩ 19,890 | 10,535 |
| Gain on valuation | 88,892 | 11,369 |
|  | 108,782 | 21,904 |
| Loss related to derivatives |  |  |
| Loss on sale | 111,639 | 98,433 |
| Loss on valuation | 88,561 | 126,451 |
|  | ₩ 200,200 | 224,884 |

116

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

# (d) Gains and losses on valuation of derivatives

Details of valuation gains and losses of derivatives for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |
| --- | --- | --- | --- |
|  | Profit or loss |  | Other comprehensive income (*) |
|  | Valuation gain | Valuation loss |  |
| Equity related derivatives: |  |  |  |
| Over the counter: |  |  |  |
| Currency forward | ₩ 2,636 | 1,148 | - |
| Equity options | 44 | 943 | - |
|  | 2,680 | 2,091 | - |
| Hedges: |  |  |  |
| Fair value hedges: |  |  |  |
| Currency forward | ₩ 1,801 | 126 | - |
| Cash flow hedges: |  |  |  |
| Currency forward | 23,481 | 38,295 | 16,212 |
| Currency swaps | 60,486 | 41,816 | 50,493 |
| Interest rate forward | 444 | 6,233 | (191,161) |
|  | 86,212 | 86,470 | (124,456) |
|  | ₩ 88,892 | 88,561 | (124,456) |

(*) The accumulated other comprehensive income resulting from the application of cash flow hedge accounting is the amount before deducting the tax effect.

|  | 2021 |  |  |
| --- | --- | --- | --- |
|  | Profit or loss |  | Accumulated other comprehensive income (*) |
|  | Valuation gain | Valuation loss |  |
| Equity related derivatives: |  |  |  |
| Over the counter: |  |  |  |
| Currency forward | ₩ 1,714 | - | - |
| Equity options | - | 312 | - |
|  | 1,714 | 312 | - |
| Hedges: |  |  |  |
| Fair value hedges: |  |  |  |
| Currency forward | ₩ 295 | 8,974 | - |
| Currency swaps | - | 883 | - |
| Cash flow hedges: |  |  |  |
| Currency forward | 183 | 56,755 | 957 |
| Currency swaps | 9,176 | 54,844 | 7,056 |
| Interest rate forward | 1 | 4,683 | 367 |
|  | 9,655 | 126,139 | 8,380 |
|  | ₩ 11,369 | 126,451 | 8,380 |

(*) The accumulated other comprehensive income resulting from the application of cash flow hedge accounting is the amount before deducting the tax effect.

117

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

(e) Gains or losses related to hedge

*i) The amounts recognized in profit or loss due to the ineffectiveness of the hedge in fair value hedges for the years ended December 31, 2022 and 2021, are as follows:*

| Fair value hedge | December 31, 2022 |  |  |
| --- | --- | --- | --- |
|  | Fair value hedge designated gains or losses (hedge item) | Fair value hedge designated gains or losses (hedging instrument) | Ineffective portion of hedge recognized at profit or loss (*) |
| Foreign currency translation risk | ₩ 23,639 | (22,389) | 1,250 |
| Stock volatility risk | (8,306) | 8,175 | (131) |
|  | ₩ 15,333 | (14,214) | 1,119 |

(*) An ineffective portion of hedge is the difference of hedging gains or losses between the hedging instrument and the hedged item.

| Fair value hedge | December 31, 2021 |  |  |
| --- | --- | --- | --- |
|  | Fair value hedge designated gains or losses (hedge item) | Fair value hedge designated gains or losses (hedging instrument) | Ineffective portion of hedge recognized at profit or loss (*) |
| Foreign currency translation risk | ₩ 15,829 | (15,075) | 754 |
| Stock volatility risk | 2,844 | (3,502) | (658) |
|  | ₩ 18,673 | (18,577) | 96 |

(*) An ineffective portion of hedge is the difference of hedging gains or losses between the hedging instrument and the hedged item.

*ii) The amounts and the accounts affecting profit or loss and other comprehensive income due to the ineffectiveness of the hedge in cash flow hedges for the years ended December 31, 2022 and 2021, are as follows:*

| Cash flow hedge | December 31, 2022 |  |  |
| --- | --- | --- | --- |
|  | Hedge gains or losses for the reporting period recognized at other comprehensive income (*1) | Ineffective portion of hedge recognized at profit or loss (*2) | Amount reclassified from cash flow hedge reserves to profit or loss |
| Interest rate risk | ₩ (191,161) | (5,788) | - |
| Foreign currency translation risk | 66,704 | (10,846) | (67,650) |
| Discontinuation of Hedging (*3) | (9,270) | - | 9,270 |
|  | ₩ (133,727) | (16,634) | (58,380) |

(*1) Amount before deduction of income tax effect as other comprehensive income in the statement of comprehensive income.

(*2) Ineffective portion of hedge: difference of hedging gains or losses between the hedging instrument and the hedged item

(*3) A derivative contract to avoid the risk of cash flow changes in debt securities due to changes in interest rates, which has expired at the end of the reporting period.

118

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

(e) Gains or losses related to hedge (continued)

ii) *The amounts and the accounts affecting profit or loss and other comprehensive income due to the ineffectiveness of the hedge in cash flow hedges for the years ended December 31, 2022 and 2021, are as follows (continued):*

| Cash flow hedge | December 31, 2021 |  |  |
| --- | --- | --- | --- |
|  | Hedge gains or losses for the reporting period recognized at other comprehensive income (*1) | Ineffective portion of hedge recognized at profit or loss (*2) | Amount reclassified from cash flow hedge reserves to profit or loss |
| Interest rate risk | 367 | (4,682) | - |
| Foreign currency translation risk | 8,013 | (6,236) | (177,092) |
| Discontinuation of Hedging (*3) | (4,734) | - | 4,734 |
| W | 3,646 | (10,918) | (172,358) |

(*1) Amount before deduction of income tax effect as other comprehensive income in the statement of comprehensive income.

(*2) Ineffective portion of hedge is the difference of hedging gains or losses between the hedging instrument and the hedged item

(*3) A derivative contract to avoid the risk of cash flow changes in debt securities due to changes in interest rates, which has expired at the end of the reporting period.

(f) Effects of hedge accounting on statement of financial position, statement of comprehensive income, and statement of changes in equity

# *i) Hedging purpose and strategy*

The Company trades derivative instruments to avoid exchange risk and interest rate risk and share price fluctuation risk arising from the assets of the Company. The Company applies fair value hedge accounting using currency forward, currency swap, and stock futures to avoid fair value changes due to exchange rate and stock price changes of foreign currency beneficiary certificates and bonds. The Company also applies cash flow hedge accounting using currency forward, currency swap and interest rate forward to avoid cash flow volatility caused by exchange rate and interest rate changes of foreign currency bonds and structured deposits, as well as bonds in won.

119

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

(f) Effects of hedge accounting on statement of financial position, statement of comprehensive income, and statement of changes in equity (continued)

# *ii) Average hedge ratio*

The nominal amount of the hedging instrument and the average hedge ratio for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Less than 1 year | 1~2 years | 2~3 years | 3~4 years | 4~5 years | More than 5 years | Total |
| Interest rate risk |  |  |  |  |  |  |  |
| - Nominal amount of hedging instrument | ₩ 176,490 | 202,945 | 18,144 | 815,507 | 361,589 | - | 1,574,675 |
| - Average price | 4.03% | 2.28% | 2.38% | 2.53% | 3.42% | - |  |
| - Average hedge ratio | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | - | 100.0% |
| Foreign currency risk(*) |  |  |  |  |  |  |  |
| - Nominal amount of hedging instrument | ₩ 1,192,721 | 738,411 | 622,762 | 376,651 | 759,705 | - | 3,690,250 |
| - Average hedge ratio: | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | - | 100.0% |

(*) The average exchange rate of the hedging instrument is 1,204.52 USD/KRW, 1,340.75 EUR/KRW, 1,484 GBP/KRW, 827.83 AUD/KRW, 126.42 SEK/KRW.

|  | 2021 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Less than 1 year | 1~2 years | 2~3 years | 3~4 years | 4~5 years | More than 5 years | Total |
| Interest rate risk |  |  |  |  |  |  |  |
| - Nominal amount of hedging instrument | ₩ - | 18,900 | 202,945 | 18,144 | 380,669 | - | 620,658 |
| - Average price | - | 1.78% | 2.28% | 2.38% | 2.38% | - |  |
| - Average hedge ratio | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | - | 100.0% |
| Foreign currency risk(*1) |  |  |  |  |  |  |  |
| - Nominal amount of hedging instrument | ₩ 1,403,320 | 737,298 | 681,418 | 238,297 | 231,184 | 22,525 | 3,314,042 |
| - Average hedge ratio: | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| Stock price volatility risk(*2) |  |  |  |  |  |  |  |
| - Nominal amount of hedging instrument | ₩ 122,073 | - | - | - | - | - | 122,073 |
| - Average hedge ratio: | 100.0% | - | - | - | - | - | 100.0% |

(*1) The average exchange rate of the hedging instrument is USD/KRW 1,149.03, EUR/KRW 1,311.50, GBP/KRW 1,484.00, AUD/KRW 813.81, SEK/KRW 126.47

(*2) The average price condition of the hedging instrument is KOSPI futures ₩395.24 and S&P futures USD 4,627.50.

120

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

(f) Effects of hedge accounting on statement of financial position, statement of comprehensive income, and statement of changes in equity (continued)

iii) The impact of hedging instrument on statement of financial position, statement of comprehensive income, statement of changes in equity designated as of December 31, 2022 and 2021.

| 2022 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
| Classification |  | Nominal amount | Carying value |  | Fair value changes during the period |
|  |  |  | Asset | Liability |  |
| Fair value hedge | Currency forward | ₩ 106,908 | 2,020 | 126 | 1,675 |
|  | Interest rate forward | 1,574,675 | 5,546 | 209,522 | (196,949) |
| Cash flow hedge | Currency swap | 2,478,262 | 53,565 | 62,047 | 67,785 |
|  | Currency forward | ₩ 1,105,080 | 26,167 | 42,577 | 519 |

| 2021 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
| Classification |  | Nominal amount | Carying value |  | FV changes during the period |
|  |  |  | Asset | Liability |  |
| Fair value hedge | Currency swap | ₩ 12,341 | - | 1,125 | (883) |
|  | Currency forward | 364,681 | 349 | 8,995 | (8,679) |
|  | Equity futures | 122,073 | - | - | (1,877) |
| Cash flow hedge | Interest rate forward | 620,658 | 758 | 7,784 | (4,315) |
|  | Currency swap | 1,856,327 | 3,248 | 88,546 | (43,783) |
|  | Currency forward | ₩ 1,080,692 | 177 | 34,696 | (57,264) |

iv) The impact of hedged item on statement of financial position, statement of comprehensive income, statement of changes in equity designated as of December 31, 2022 and 2021.

| 2022 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Classification |  | Carrying value |  | Accumulated adjustments for fair value hedge |  | FV changes during the period | Cash flow hedge reserves |
|  |  | Asset | Liability | Asset | Liability |  |  |
| Fair value hedge | Foreign exchange risk: Securities in foreign currencies | ₩ 102,113 | - | - | - | (1,111) | - |
|  | Stock price volatility risk | - | - | - | - | - | - |
| Cash flow hedge | Interest rate risk: bonds in won and in foreign currencies | 475,027 | - | - | - | - | (124,271) |
|  | Foreign exchange risk: bonds and loans in foreign currencies | ₩ 2,778,511 | - | - | - | (14,702) | 39,258 |

121

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **22. Derivatives (continued)**

(f) Effects of hedge accounting on statement of financial position, statement of comprehensive income, and statement of changes in equity (continued)

iv) *The impact of hedged item on statement of financial position, statement of comprehensive income, statement of changes in equity designated as of December 31, 2022 and 2021 (continued).*

| 2021 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Classification |  | Carrying value |  | Accumulated adjustments for fair value hedge |  | FV changes during the period | Cash flow hedge reserves |
|  |  | Asset | Liability | Asset | Liability |  |  |
| Fair value hedge | Foreign exchange risk: Securities in foreign currencies | ₩ 410,760 | - | - | - | 15,702 | - |
|  | Stock price volatility risk | 124,391 | - | - | - | 2,844 | - |
| Cash flow hedge | Interest rate risk: bonds in won and in foreign currencies | 607,062 | - | - | - | - | 76,160 |
|  | Foreign exchange risk: bonds and loans in foreign currencies | ₩ 2,848,303 | - | - | - | 132,009 | (27,446) |

(g) As of December 31, 2022, due from banks restricted on the use of derivative trading is ₩3,461 million (₩16,137 million as of December 31, 2021). Of these, there is no amount restricted on use, deposited at Shinhan Securities Co., Ltd., a related party as of December 31, 2022.

(h) For the year ended December 31, 2022, financial assets of ₩377,095 million (₩225,112 million as of December 31, 2021) are provided as collateral to financial institutions such as Samsung Futures Co., Ltd. for derivatives transactions. Of these, the collateral amount provided to the related party, Shinhan Securities Co., Ltd. and Shinhan bank Co., Ltd. is ₩10,019 and ₩12,609 million, respectively.

# **23. Other assets**

Other assets as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Reinsurance assets | ₩ 295,621 | 47,050 |
| Prepaid expense | 11,115 | 9,635 |
| Prepayments | - | 1,577 |
| Others | 21 | 229 |
|  | ₩ 306,757 | 58,491 |

122

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **24. Secured Assets**

The assets provided as collateral as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 | Reason for provision of collateral |
| --- | --- | --- | --- |
| Securities at fair value through other comprehensive income | ₩ 572,870 | 23,840 | Derivatives |
| Securities at amortized cost | 198,732 | 257,569 | Derivatives, overdraft, compensation joint fund, borrowings |
| Investment property | 624 | 624 | Settlement of mortgage loan |
|  | ₩ 772,226 | 282,033 |  |

# **25. Insurance contract liabilities**

(a) Details of insurance contract liabilities

Details of insurance contract liabilities as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Fixed-interest | ₩ 26,456,288 | 24,416,006 |
| Variable-interest | 26,912,102 | 28,962,785 |
|  | ₩ 53,368,390 | 53,378,791 |

(b) Details of insurance contract liabilities by insurance risk classification

Details of insurance contract liabilities by insurance risk classification as of December 31, 2022 and 2021, are as follows:

|  | Individual insurance |  |  |  | Group insurance |  |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Survival | Mortality | Endowment | Sub-total | Protection | Savings | Sub-total |  |
| Premium reserve | ₩ 13,833,896 | 29,803,239 | 7,493,266 | 51,130,401 | 13,556 | 66 | 13,622 | 51,144,023 |
| Guaranteed reserve | 20,514 | 278,826 | 745 | 300,085 | - | - | - | 300,085 |
| Unearned premium reserve | 1 | 1,393 | - | 1,394 | 1 | - | 1 | 1,395 |
| Reserve for outstanding loss | 275,088 | 1,182,007 | 338,747 | 1,795,842 | 14,154 | - | 14,154 | 1,809,996 |
| Interest dividend reserve | 59,670 | 50,356 | 92 | 110,118 | 2 | - | 2 | 110,120 |
| Excess participating policyholder dividend reserve | 1,616 | - | - | 1,616 | - | - | - | 1,616 |
| Reserve for loss from participating insurance | 1,155 | - | - | 1,155 | - | - | - | 1,155 |
|  | ₩ 14,191,940 | 31,315,821 | 7,832,850 | 53,340,611 | 27,713 | 66 | 27,779 | 53,368,390 |

123

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **25. Insurance contract liabilities (continued)**

# (b) Details of insurance contract liabilities by insurance risk classification (continued)

Details of insurance contract liabilities by insurance risk classification as of December 31, 2022 and 2021, are as follows (continued):

|  | 2021 |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Individual insurance |  |  |  | Group insurance |  |  | Total |
|  | Survival | Mortality | Endow -ment | Sub-total | Protec -tion | Savings | Sub- total |  |
| Premium reserve | ₩ 14,192,367 | 27,923,247 | 8,970,542 | 51,086,156 | 15,609 | 64 | 15,673 | 51,101,829 |
| Guaranteed reserve | 24,717 | 284,474 | 871 | 310,062 | - | - | - | 310,062 |
| Unearned premium reserve | 1 | 1,660 | - | 1,661 | 8 | - | 8 | 1,669 |
| Reserve for outstanding loss | 266,157 | 1,137,857 | 424,897 | 1,828,911 | 14,376 | - | 14,376 | 1,843,287 |
| Interest dividend reserve | 64,526 | 54,714 | 114 | 119,354 | 2 | - | 2 | 119,356 |
| Excess participating policyholder dividend reserve | 1,635 | - | - | 1,635 | - | - | - | 1,635 |
| Reserve for loss from participating insurance | 953 | - | - | 953 | - | - | - | 953 |
|  | ₩ 14,550,356 | 29,401,952 | 9,396,424 | 53,348,732 | 29,995 | 64 | 30,059 | 53,378,791 |

# (c) Changes in insurance contract liabilities

Changes in the terms of the insurance contract liabilities for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 |  |  |
| --- | --- | --- | --- | --- |
|  |  | Insurance contracts with fixed-interest | Interest contracts with variable-interest | Total |
| Beginning balance | ₩ | 24,416,006 | 28,962,785 | 53,378,791 |
| Reserve (*) |  | 2,040,282 | (2,050,683) | (10,401) |
| Ending balance | ₩ | 26,456,288 | 26,912,102 | 53,368,390 |

(*) This is the amount of provision for insurance contract liabilities less changes in reinsurance assets.

|  |  | 2021 |  |  |
| --- | --- | --- | --- | --- |
|  |  | Insurance contracts with fixed-interest | Interest contracts with variable-interest | Total |
| Beginning balance | ₩ | 10,265,744 | 17,847,923 | 28,113,667 |
| Increase due to merger |  | 12,981,945 | 11,491,957 | 24,473,902 |
| Reserve (*) |  | 1,168,317 | (377,095) | 791,222 |
| Ending balance | ₩ | 24,416,006 | 28,962,785 | 53,378,791 |

(*) This is the amount of provision for insurance contract liabilities less changes in reinsurance assets.

124

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **25. Insurance contract liabilities (continued)**

(d) Changes in insurance contract liabilities by insurance risk classification

Changes in insurance contract liabilities by insurance risk classification for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  | Group insurance |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Individual insurance |  |  |  | Protection | Savings | Sub-total | Total |
|  | Survival | Mortality | Endowment | Sub-total |  |  |  |  |
| Beginning balance | ₩ 14,550,356 | 29,401,952 | 9,396,424 | 53,348,732 | 29,995 | 64 | 30,059 | 53,378,791 |
| Reserve (reversal) (*) | (358,416) | 1,913,869 | (1,563,574) | (8,121) | (2,282) | 2 | (2,280) | (10,401) |
| Ending balance | ₩ 14,191,940 | 31,315,821 | 7,832,850 | 53,340,611 | 27,713 | 66 | 27,779 | 53,368,390 |

(*) This is the amount of provision for insurance contract liabilities less changes in reinsurance assets.

|  | 2021 |  |  |  | Group insurance |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Individual insurance |  |  |  | Protection | Savings | Sub-total | Total |
|  | Survival | Mortality | Endowment | Sub-total |  |  |  |  |
| Beginning balance | ₩ 6,221,422 | 14,476,160 | 7,382,194 | 28,079,776 | 33,829 | 62 | 33,891 | 28,113,667 |
| Increase due to merger | 8,285,846 | 13,462,702 | 2,725,354 | 24,473,902 | - | - | - | 24,473,902 |
| Reserve (reversal) (*) | 43,088 | 1,463,090 | (711,124) | 795,054 | (3,834) | 2 | (3,832) | 791,222 |
| Ending balance | ₩ 14,550,356 | 29,401,952 | 9,396,424 | 53,348,732 | 29,995 | 64 | 30,059 | 53,378,791 |

(*) This is the amount of provision for insurance contract liabilities less changes in reinsurance assets.

125

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **26. Liability Adequacy Test (LAT)**

# (a) Scope

Liability adequacy tests were performed on the premium reserve, unearned premium reserve and guarantee reserve for the contracts held at December 31, 2022 and 2021. The premium reserve considered the amount net level premium reserve less, where appropriate, deferred acquisition cost in accordance with the article 6-3 of Regulation on Supervision of Insurance Business Act.

# (b) Output overview

In the debt appraisal system, the insurance premium surplus method is applied to calculate premium deficits.

Premium deficiency refers to deficiency when the amount of accumulated reserve is insufficient due to a decrease in the interest rate after the sale of the product or an increase in the risk rate compared with the expected basic rate at the time of product development.

The insurance premium standard inspection method is a method of calculating the reserve amount based on the present value of total income reflecting the interest rate, the risk rate, the business ratio, the cancellation rate, etc. and the present value of the total expenditure, that is, (discount rate), business ratio, risk rate, and cancellation rate calculated based on the Company’s own experience, which reflects company-specific characteristics, and does not reflect subjective factors such as management’s willingness to improve management.

(c) The assumptions of the current estimation used to assessment and their basis for calculation was as follows:

| Classification | Assumptions |  |  | Measurement basis |
| --- | --- | --- | --- | --- |
|  | Dec 31, 2022 | Dec 31, 2021 | Jan 1, 2021 |  |
| Discount rate | -2.838% ~ 21.144% | -3.39% ~ 19.541% | -3.623% ~ 23.477% | The scenario adding liquidity premium to risk-free rate, which is suggested from Financial Supervisory Service |
| Mortality rate | 9% ~ 771% | 16% ~ 751% | 10.38% ~ 585.90% | - Other than general death: the ratio of accident insurance premiums to on-level risk insurance premiums by risk security and elapsed period based on the last five years’ experience statistics - General mortality: Ratio of actual mortality to the latest expected mortality rate |
| Surrender ratio | 0% ~ 78% | 0% ~ 84% | 0.53% ~ 29.83% | Surrender ratio by elapsed period, classes of sales channel, product of last 5 years |

(*) Among the projected ratios, the acquisition cost was calculated based on the amount to be executed in the future according to the Company’s internal recruitment allowance regulations, and the maintenance cost was calculated by reflecting the Company’s future project cost policy based on the recent one-year experience statistics.

126

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **26. Liability Adequacy Test (LAT) (continued)**

(d) The result of liability adequacy test as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |
| --- | --- | --- | --- |
|  | Provisions for test | LAT base | Premium loss (surplus) |
| Participating: |  |  |  |
| Fixed interest | ₩ 1,388,054 | 1,679,179 | (291,125) |
| Variable interest | 2,082,019 | 2,890,311 | (808,292) |
| Non- Participating: |  |  |  |
| Fixed interest | 20,381,273 | 6,243,930 | 14,137,343 |
| Variable interest | 21,124,126 | 17,994,755 | 3,129,371 |
| Variable insurance | 147,988 | (1,104,320) | 1,252,308 |
| Joint reinsurance | 240,720 | 135,465 | 105,255 |
|  | ₩ 45,364,180 | 27,839,320 | 17,524,860 |

|  | December 31, 2021 |  |  |
| --- | --- | --- | --- |
|  | Provisions for test | LAT base | Premium loss (surplus) |
| Participating: |  |  |  |
| Fixed interest | ₩ 1,371,625 | 2,098,387 | (726,762) |
| Variable interest | 2,099,040 | 3,024,911 | (925,871) |
| Non- Participating: |  |  |  |
| Fixed interest | 18,749,426 | 8,155,797 | 10,593,629 |
| Variable interest | 23,059,035 | 21,378,217 | 1,680,818 |
| Variable insurance | 109,753 | (1,437,388) | 1,547,141 |
|  | ₩ 45,388,879 | 33,219,924 | 12,168,955 |

|  | January 1, 2021 |  |  |
| --- | --- | --- | --- |
|  | Provisions for test | LAT base | Premium loss (surplus) |
| Participating: |  |  |  |
| Fixed interest | ₩ 598,793 | 1,371,496 | (772,703) |
| Variable interest | 915,382 | 1,062,384 | (147,002) |
| Non- Participating: |  |  |  |
| Fixed interest | 7,230,482 | 4,222,670 | 3,007,812 |
| Variable interest | 14,456,394 | 13,753,963 | 702,431 |
| Variable insurance | 165,259 | 61,212 | 104,047 |
|  | ₩ 23,366,310 | 20,471,725 | 2,894,585 |

127

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **27. Adjustment of policyholder reserves**

The adjustment of policyholder reserves for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Valuation gains or losses of securities at fair value through other comprehensive income | ₩ (1,409) | (10,565) |
| Valuation gains or losses of financial assets at fair value through profit or loss (Overlay approach) | (207) | 14,915 |
|  | ₩ (1,616) | 4,350 |

# **28. Borrowings**

Borrowings as of December 31, 2022 and 2021, are as follows:

| Type of borrowing | Lender | Currency | Date of borrowing | Maturity date | Interest rate | As at 2022 | As at 2021 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| RP agreement | Korea Securities Finance Corp | KRW | 2022-12-16 | 2023-03-17 | 3.61% | 10,000 | - |

# **29. Debentures**

Debentures as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Currency | Issue date | Redemption date | Contracted interest rate | Maturity | Face value | Book Value (*2) |
| Subordinated bonds (no guarantee) (*1) | KRW | 2018.06.12 | 2028.06.12 | 4.03% | 10 years | ₩ 200,000 | 199,946 |
| Subordinated bonds (no guarantee) (*1) | USD | 2018.11.30 | 2028.11.30 | 5.10% | 10 years | 443,555 | 443,505 |
|  |  |  |  |  |  | ₩ 643,555 | 643,451 |

(*1) The maturity of unsecured subordinated bonds is 10 years from the date of issuance, and all subordinated bonds can be repaid on the 5th year from the date of issuance and every interest payment date thereafter.

(*2) The difference from the face amount was appropriated as the present value discount.

|  | 2021 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Currency | Issue date | Redemption date | Contracted interest rate | Maturity | Face value | Book Value (*2) |
| Subordinated bonds (no guarantee) (*1) | KRW | 2018.06.12 | 2028.06.12 | 4.03% | 10 years | ₩ 200,000 | 199,825 |
| Subordinated bonds (no guarantee) (*1) | USD | 2018.11.30 | 2028.11.30 | 5.10% | 10 years | 414,925 | 414,820 |
|  |  |  |  |  |  | ₩ 614,925 | 614,645 |

(*1) The maturity of unsecured subordinated bonds is 10 years from the date of issuance, and all subordinated bonds can be repaid on the 5th year from the date of issuance and every interest payment date thereafter.

(*2) The difference from the face amount was appropriated as the present value discount.

128

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **30. Other financial liabilities**

Other financial liabilities as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Claims payables | ₩ 122,159 | 46,800 |
| Account payables | 4,295 | 24,533 |
| Accrued expense | 272,597 | 271,689 |
| Rental deposit | 1,178 | 1,287 |
|  | ₩ 400,229 | 344,309 |

# **31. Employee benefits**

# (a) Defined benefit obligations and plan assets

The Company operates a defined benefit plan based on the employee's pension compensation benefits and service provision period, and trusts the plan assets to Shinhan Bank Co., Ltd.

Defined benefit obligations and plan assets as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Present value of defined benefit obligations | ₩ 121,399 | 144,165 |
| Fair value of plan assets | (166,287) | (176,916) |
| Recognized liabilities for defined benefit obligations | ₩ (44,888) | (32,751) |

(b) Changes in the present value of defined benefit obligation for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Beginning balance | ₩ 144,165 | 115,316 |
| Current service cost | 10,025 | 11,300 |
| Interest expense | 4,925 | 3,877 |
| Remeasurement loss (gain): | (25,987) | (6,351) |
| Demographic assumptions | (492) | - |
| Financial assumptions | (28,746) | (6,163) |
| Experience adjustment | 3,251 | (188) |
| Past service cost | 8,330 | 795 |
| Settlement | - | (2,480) |
| Salaries | (19,102) | (1,717) |
| Severance payment transferred to associates | (957) | (699) |
| Increase due to merger | - | 24,124 |
| Ending balance | ₩ 121,399 | 144,165 |

# (c) Plan assets

|  | 2022 | 2021 |
| --- | --- | --- |
| Beginning balance | ₩ 176,916 | 123,237 |
| Expected return | 6,993 | 4,161 |
| Remeasurement factors | (4,404) | (2,059) |
| Contributions | 6,000 | 28,800 |
| Benefits Paid | (19,218) | (4,813) |
| Increases due to merger | - | 27,590 |
| Ending balance | ₩ 166,287 | 176,916 |

129

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **31. Employee benefits (continued)**

(d) The gains and losses related to the defined benefit plan for the years ended December 31, 2022 and 2021, are as follows.

|  | 2022 | 2021 |
| --- | --- | --- |
| Current service cost (*) | ₩ 10,025 | 11,300 |
| Interest expense | 4,925 | 3,877 |
| Past service cost | 8,330 | 795 |
| Settlement gain | - | (2,480) |
| Expected return on plan assets | (6,993) | (4,161) |
|  | ₩ 16,287 | 9,331 |

(*) Above gain and loss related to the defined benefit plan are included in operating expenses and investment management expenses. Also, for the year ended December 31, 2022, the gains and losses of ₩ 853 million (₩ 1,218 million for the year ended December 31, 2021) from defined benefit plan has been replaced to property and equipment, and intangible assets.

(e) The gains and losses related to the defined contribution plan for the years ended December 31, 2022 and 2021, are as follows.

|  | 2022 | 2021 |
| --- | --- | --- |
| Operating expenses | ₩ 4,505 | 4,484 |
| Investment administration expenses | 299 | 183 |
|  | ₩ 4,804 | 4,667 |

(*) For the year ended December 31, 2022, among gains and losses related to the defined contribution plan, ₩666 million (₩693 million for the year ended December 31, 2021) has been replaced as property and equipment and intangible assets.

(f) Details of plan assets by type

The composition of plan assets as of December 31, 2022 and 2021, are as follows:

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Ratio | Amount | Ratio | Amount |
| Time deposits | 50.21% | ₩ 83,496 | 6.28% | ₩ 11,117 |
| Retirement pension | 45.71% | 76,014 | 82.09% | 145,223 |
| Others | 4.08% | 6,777 | 11.63% | 20,576 |
|  | 100.00% | 166,287 | 100.00% | 176,916 |

(g) Actuarial assumptions as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 | Description |
| --- | --- | --- | --- |
| Discount rate | 5.89% | 3.59% | AA0 corporate bond yields |
| Future salary increase rate | 3.55% + increase rate | 3.35%+ increase rate | Average for 5 years |
| Weighted average maturity | 13.23 years | 12.96 years |  |
| Retirement rate | 2% ~3% | 1.34% ~ 7.27% | Average for 3 years |
| Male | 0.008% ~ 0.090% | 0.008% ~ 0.090% | Standard rate by Korea Insurance Development Institute |
| Mortality rate | 0.003% ~ 0.032% | 0.003% ~ 0.032% | Standard rate by Korea Insurance Development Institute |
| Female |  |  |  |

130

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **31. Employee benefits (continued)**

# (h) Sensitivity analysis

As of December 31, 2022 and 2021, reasonably possible changes in one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Increase | Decrease | Increase | Decrease |
| Discount rate (1%p movement) | ₩ (10,622) | 12,272 | (11,613) | 13,399 |
| Future salary increase rate (1%p movement) | 12,451 | (10,950) | 13,301 | (11,736) |

(i) The weighted average maturities of defined benefit obligations applied as of December 31, 2022 and 2021 are 10.4 years and 11.4 years, respectively.

(j) Defined contribution plan for the year ending December 31, 2023 is expected to be ₩ 8,000 million.

# **32. Provisions**

# (a) Details of provisions

Details of changes in provisions for restoration liabilities for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Restoration liabilities | ₩ 16,657 | 24,874 |
| Unused limits | 7 | 93 |
| Other long-term employee benefits | 13,270 | 12,819 |
| Litigation liabilities | 809 | - |
| Others(*) | 51,975 | 54,038 |
| Ending balance | ₩ 82,718 | 91,824 |

(*) The amount expected to be paid in the future for the insurance refund of the insurance contract whose extinctive prescription has been completed is estimated and counted as a liability for completion of prescription. In addition, due to the dispute over the obligation to explain, the amount expected to be paid in the future is estimated and recorded as other provisions.

131

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **32. Provisions (continued)**

# (b) Changes in provisions

Increase and decrease of provision for the years ended December 31, 2022 and 2021, are as follows:

| Classification | Restoration liabilities |  | Unused limits(*2) |  | Other long-term employee benefits |  | Litigation liabilities |  | Other provisions |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Beginning balance | ₩ 24,874 | 2,682 | 93 | 10 | 12,819 | 8,771 | - | - | 54,038 | 18,869 |
| Increases due to merger | - | 14,484 | - | - | - | 6,046 | - | - | - | 15,418 |
| Allowance(Reverse) | 10,006 | 8,748 | (86) | 83 | 1,915 | 1,332 | 809 | - | 22,019 | 37,593 |
| Amount used | (18,561) | (771) | - | - | (1,872) | (1,184) | - | - | (24,082) | (17,842) |
| Others(*1) | 338 | (269) | - | - | 408 | (2,146) | - | - | - | - |
| Ending balance | ₩ 16,657 | 24,874 | 7 | 93 | 13,270 | 12,819 | 809 | - | 51,975 | 54,038 |

(*1) The effects of changes in estimates, such as the amount and discount rate over time of restoration provisions and other long-term employee benefit provisions valued at present value.

(*2) There was no significant increase in credit risk since initial recognition, and there was no significant change in credit risk for the year ended December 31, 2022.

132

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **32. Provisions (continued)**

# (c) Assumptions of other long-term employee benefits

The main assumptions used to calculate the reward for long-term employees according to the Company's long-term service as of December 31, 2022 and 2021, are as follows.

|  | 2022 | 2021 | Description |
| --- | --- | --- | --- |
| Discount rate | 5.64% | 3.23% | AA0 corporate bond yields |
| Future salary increase rate | 3.55% + increase rate | 3.35%+ increase rate | Average for 5 years |
| Retirement rate | 2% ~3% | 1.34% ~ 7.27% | Average for 3 years |
| Male | 0.008% ~ 0.090% | 0.008% ~ 0.090% | Standard rate by Korea Insurance Development Institute |
| Mortality rate |  |  |  |
| Female | 0.003% ~ 0.032% | 0.003% ~ 0.032% | Standard rate by Korea Insurance Development Institute |

# (d) Expected period of provision outflows

|  | 2022 |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Expected outflow | Less than 1 year | 1~3 years | 3~5 years | More than 5 years |
| Provision(*1) | ₩ 17,524 | 11,046 | 451 | 5,231 | 796 |
| Unused limits | 7 | 6 | - | - | 1 |
| Other long-term employee benefits(*2) | 13,833 | 1,671 | 2,758 | 3,518 | 5,886 |
| Litigation liabilities | 809 | - | 809 | - | - |
| Other liabilities | 51,975 | 14,731 | 28,972 | 2,740 | 5,532 |

(*1) It is the expected amount to be incurred at the time of the outflow of estimated restoration expense, which is before discounting as current value.

(*2) The expected outflow of provision for other long-term employee benefits is an undiscounted amount to its current value.

# **33. Other liabilities**

Other liabilities as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Advance receipts | ₩ 38,325 | 78,177 |
| Unearned income | 4,730 | 1,001 |
| Deposits | 24,490 | 22,812 |
| Accrued VAT | 53 | 62 |
| Others | 2,013 | 660 |
|  | ₩ 69,611 | 102,712 |

133

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **34. Equity**

(a) Equity as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Share capital: |  |  |
| Ordinary shares capital | ₩ 578,274 | 578,274 |
| Hybrid bonds: |  |  |
| Hybrid bonds | 299,452 | 299,452 |
| Capital surplus(*): |  |  |
| Capital premium | 819,351 | 2,232,853 |
| Other capital surplus | 672 | 672 |
|  | 820,023 | 2,233,525 |
| Capital adjustment: |  |  |
| Stock option | 1,464 | 1,458 |
| Accumulated other comprehensive income, net of tax: |  |  |
| Gain or loss on financial assets at fair value through profit or loss - Overlay approach | (14,763) | 202,418 |
| Gain or loss on securities at fair value through other comprehensive income | (1,853,513) | (142,978) |
| Net gain(loss) from cash flow hedges | (60,935) | 37,847 |
| Other comprehensive income(loss) of separate account | (136,056) | (22,849) |
| Remeasurement component of defined benefit obligation | (6,958) | (22,511) |
|  | (2,072,225) | 51,927 |
| Retained earnings: |  |  |
| Legal reserve | 47,400 | 47,400 |
| Regulatory reserve for loan losses | 65,861 | 41,086 |
| Unappropriated retained earnings | 3,755,927 | 1,907,529 |
|  | 3,869,188 | 1,996,015 |
|  | ₩ 3,496,176 | 5,160,651 |

(*) During the period, ₩1,413,502 million was reclassified from capital surplus to retained earnings.

(b) Capital stock

Capital stock of the Company as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Number of authorized shares | 400,000,000 | 400,000,000 |
| Par value per share in won | ₩ 5,000 | 5,000 |
| Number of issued common stocks outstanding | 115,654,859 | 115,654,859 |

(c) Hybrid bonds

| Classification | Issue date | Maturity date | Interest rate | 2022 | 2021 |
| --- | --- | --- | --- | --- | --- |
| Hybrid bonds non-interest bearing | 2020-08-11 | 2050-08-11 | 3.60% | ₩ 300,000 | 300,000 |
| Issue cost |  |  |  | (756) | (756) |
| Deferred tax effects |  |  |  | 208 | 208 |
| Total |  |  |  | ₩ 299,452 | 299,452 |

The above new capital securities can be repaid early by the Company from five years after issuance, and the interest rate will be adjusted only once five years after the issuance date. On the other hand, the Company has the right to choose whether to extend maturity of the hybrid bond with the same covenant, upon maturity date.

134

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **34. Equity (continued)**

# (d) Accumulated other comprehensive income

Changes in accumulated other comprehensive income for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  | Items that will never be reclassified to profit or loss |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Items that are or may be reclassified to profit or loss |  |  |  | Gain (loss) on financial asset at fair value through other comprehensive income | Remeasurements of the defined benefit plans |  |
|  | Gain(loss) on financial asset at fair value through profit or loss (overlay approach) | Gain(loss) on financial asset at fair value through other comprehensive income | Valuation gains and losses on derivative for cash flow hedges | Other comprehensive of separate accounts |  |  |  |
| Beginning balance | 202,418 | (140,034) | 37,847 | (22,849) | (2,944) | (22,511) | 51,927 |
| Change due to fair value | (204,769) | (2,122,536) | - | (153,594) | (4,256) | - | (2,485,155) |
| Change due to disposal | (109,635) | (188,628) | - | - | - | - | (298,263) |
| Policyholders’ equity adjustment (*) | 15,121 | (8,952) | - | - | (204) | - | 5,965 |
| Remeasurements of the defined benefit plans | - | - | - | - | - | 21,583 | 21,583 |
| Effect of hedge accounting | - | - | (133,726) | - | - | - | (133,726) |
| Deferred income taxes | 82,102 | 612,900 | 34,944 | 40,387 | 1,141 | (6,030) | 765,444 |
| Ending balance | (14,763) | (1,847,250) | (60,935) | (136,056) | (6,263) | (6,958) | (2,072,225) |

(*) The Company separately accounts for unrealized gains or losses of securities at fair value through other comprehensive income into other comprehensive income and policyholders’ reserves in accordance with the Regulation of Insurance Industry Supervisory.

135

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **34. Equity (continued)**

(d) Accumulated other comprehensive income (continued)

Changes in accumulated other comprehensive income for the years ended December 31, 2022 and 2021, are as follows (continued):

|  | 2021 |  |  |  | Items that will never be reclassified to profit or loss |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Items that are or may be reclassified to profit or loss |  |  |  | Gain (loss) on financial asset at fair value through other comprehensive income | Remeasurements of the defined benefit plans |  |
|  | Gain(loss) on financial asset at fair value through profit or loss (overlay approach) | Gain(loss) on financial asset at fair value through other comprehensive income | Valuation gains and losses on derivative for cash flow hedges | Other comprehensive of separate accounts |  |  |  |
| Beginning balance | ₩ 119,891 | 76,887 | (18,914) | 17,882 | (986) | (17,333) | 177,427 |
| Increases due to merger | 96,082 | 77,643 | 54,274 | (1,171) | - | (8,289) | 218,539 |
| Change due to fair value | 19,624 | (392,215) | - | (54,565) | (2,905) | - | (430,061) |
| Change due to disposal | (42,022) | (39,821) | - | - | - | - | (81,843) |
| Policyholders’ equity adjustment (*) | 3,701 | 25,741 | - | - | 204 | - | 29,646 |
| Remeasurements of the defined benefit plans | - | - | - | - | - | 4,291 | 4,291 |
| Effect of hedge accounting | - | - | 3,646 | - | - | - | 3,646 |
| Deferred income taxes | 5,142 | 111,731 | (1,159) | 15,005 | 743 | (1,180) | 130,282 |
| Ending balance | ₩ 202,418 | (140,034) | 37,847 | (22,849) | (2,944) | (22,511) | 51,927 |

(*) The Company separately accounts for unrealized gains or losses of securities at fair value through other comprehensive income into other comprehensive income and policyholders’ reserves in accordance with the Regulation of Insurance Industry Supervisory.

136

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **34. Equity (continued)**

# (e) Retained earnings

# *i) Legal reserve*

According to the provisions of the Commercial Law, at least 10% of the profit dividend is accumulated as a legal reserve at each settlement period until 50% of the capital is reached, and the legal reserve cannot be allocated in cash and can only be used for the maintenance of carrying forward losses and capital transfer by resolution at the general meeting of shareholders.

# *ii) Statement of appropriation of retained earnings*

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Expected date of appropriation: |  | Confirmed date of appropriation: |  |
|  |  | 2023-03-22 |  | 2023-03-23 |
| I. RETAINED EARNINGS BEFORE APPROPRIATIONS: | ₩ | 3,755,927 |  | 1,907,529 |
| 1. Unappropriated retained earnings carried over from prior year |  | 1,882,754 |  | 1,736,682 |
| 2. Profit for the year |  | 470,471 |  | 181,647 |
| 3. Hybrid bond interests |  | (10,800) |  | (10,800) |
| 4. Reserve for capital surplus |  | 1,413,502 |  | - |
| II. TRANSFERS FROM VOLUNTARY RESERVES: |  | 1,515 |  | - |
| 1. Regulatory Reserve (*) |  | 1,515 |  | - |
| III. APPROPRIATIONS: |  | (178,483) |  | (24,775) |
| 1. Legal Reserve |  | (16,226) |  | - |
| 2. Regulatory Reserve |  | - |  | (24,775) |
| 3. Dividends |  |  |  |  |
| Dividend per share (dividend face value) as of Dec 31, 2022: ₩1,403 (28%) |  | (162,257) |  | - |
| IV. UNAPPROPRIATED RETAINED EARNINGS TO BE CARRIED FORWARD TO SUBSEQUENT YEAR | ₩ | 3,578,959 |  | 1,882,754 |

(*) As a result of the shareholders' general meeting in December 2022, it was reclassified from capital surplus to retained earnings.

# *iii) Regulatory reserve for loan losses*

In accordance with Regulations for the Supervision of Financial Institutions, the Company reserves the difference between allowance for credit losses by Korean IFRS and that as required by the Regulations at the account of regulatory reserve for loan losses in retained earnings. Reserves for loan losses are calculated by the difference between the total amount of credit loss provisions under IFRS and the total amount of credit loss provisions under supervisory regulations for each category of corporate loans, household loans, and real estate project financing loans. Such regulatory reserve is a voluntary reserve for retained earnings, and if there is an untreated loss, the reserve shall be accumulated from the time the untreated loss is treated. If the current year's reserve exceeds the reserve aimed to be accumulated as of the end of the reporting period, the excess amount may be reversed.

iii-1) Changes in regulatory reserve for loan losses for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Beginning balance | ₩ 65,861 | 41,086 |
| Planned regulatory provision(reversal) of loan losses(*) | (1,515) | 24,775 |
| Ending balance | ₩ 64,346 | 65,861 |

(*) Regulatory reserves of previous financial year include temporary gain resulting from merger.

137

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **34. Equity (continued)**

(e) Retained earnings (continued)

*iii) Regulatory reserve for loan losses (continued)*

iii-2) Adjusted income after reflecting reserve for loan losses and provision for reserve for loan losses

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Profit for the year | ₩ | 470,471 | 181,647 |
| Regulatory provision(reversal) of loan losses |  | 1,515 | (24,775) |
| Adjusted income after reserve for loan losses |  | 471,986 | 156,872 |
| Adjusted income per share after reserve for loan losses in won(*) | ₩ | 3,988 | 1,869 |

(*) Hybrid bond interests are excluded.

*iv) Reserve for financial soundness*

Based on the insurance industry supervisory regulations, the Company estimates the liability adequacy test amount as of the end of 2022 from the target liability adequacy test amount and the insurance business supervisory enforcement regulations 6-11(3)(Reserve for financial soundness). For the year ended December 31, 2022, there are no amounts to be accumulated.

# **35. Share-based payment**

(a) Stock options as of December 31, 2022 are as follows:

| Classification(*) | 2018 | 2019 | 2020 | 2021 | 2022 |
| --- | --- | --- | --- | --- | --- |
| Type | Equity-settled share-based payment |  | Cash-settled share-based payment |  |  |
| Service period | 4 years from the commencement date of the year to which the grant date belongs |  |  |  |  |
| Performance conditions | Linked to relative stock price (20.0%) and linked to 4 years management index (80.0%) |  |  |  |  |
| Estimated vested amount based on settlement date | 398 shares | 56,790 shares | 44,716 shares | 66,368 shares | 69,950 shares |

(*) Based on the performance-related stock compensation, the standard stock price (the arithmetic average of the weighted average stock price for the past two months, the past one month, and the past one week from the day before the reference date) after the year of the grant year is paid in cash. The fair value of the stock price is evaluated at the closing price of each settlement.

138

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **35. Share-based payment (continued)**

# (b) Share-based payment expenses

Stock compensation costs calculated for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Compensation costs recorded for the year | ₩ 2,328 | 3,007 |

# (c) Accrued expenses and intrinsic value

Accrued expenses and intrinsic value as of December 31, 2022 and 2021, are as follows:

|  | Accrued expenses | Intrinsic value (*1) |
| --- | --- | --- |
| Performance-linked stock options (*2) | ₩ 8,354 | 8,354 |

(*1) The intrinsic value for stock options vested at 2019 was calculated based on the stock price (₩ 36,951) as of January 1, 2023, and the amount granted after that was calculated based on the closing price of the settlement date (₩ 35,200).

(*2) The amount to be paid to Shinhan Financial Group under the repayment payment agreement was calculated based on the closing price of the settlement date and recognized as a liability. Of this amount, the cost recognized as a liability directly deducted from the capital is ₩ 1,982 million.

|  | Accrued expenses | Intrinsic value (*1) |
| --- | --- | --- |
| Performance-linked stock options (*2) | ₩ 7,507 | 7,507 |

(*1) The intrinsic value for stock options vested at 2018 was calculated based on the stock price (₩ 37,387) as of January 1, 2022, and the amount granted after that was calculated based on the closing price of the settlement date (₩ 36,800).

(*2) The amount to be paid to Shinhan Financial Group under the repayment payment agreement was calculated based on the closing price of the settlement date and recognized as a liability. Of this amount, the cost recognized as a liability directly deducted from the capital is ₩ 3,455 million.

# **36. Premium income**

The premium income for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Individual insurance: |  |  |
| Survival | ₩ 661,948 | 663,748 |
| Mortality | 4,574,192 | 3,562,828 |
| Endowment | 984,471 | 665,118 |
|  | 6,220,611 | 4,891,694 |
| Group insurance: |  |  |
| Protection type | 2,592 | 4,389 |
|  | ₩ 6,223,203 | 4,896,083 |

139

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **37. Insurance claims paid**

Details of insurance claims paid by insurance risk for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  | 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Claims | Surrender value | Dividend | Total | Claims | Surrender value | Dividend | Total |
| Individual insurance |  |  |  |  |  |  |  |  |
| Survival | ₩ 37,579 | 1,403,464 | 2,750 | 1,443,793 | 25,893 | 872,466 | 2,679 | 901,038 |
| Mortality | 337,202 | 1,944,821 | 4,854 | 2,286,877 | 261,070 | 1,502,263 | 4,164 | 1,767,497 |
| Endowment | 947,552 | 1,781,768 | 26 | 2,729,346 | 656,707 | 879,520 | 40 | 1,536,267 |
|  | 1,322,333 | 5,130,053 | 7,630 | 6,460,016 | 943,670 | 3,254,249 | 6,883 | 4,204,802 |
| Group insurance |  |  |  |  |  |  |  |  |
| Protection | 1,071 | 4,138 | - | 5,209 | 1,982 | 6,543 | - | 8,525 |
| Savings | - | - | - | - | 1 | - | - | 1 |
|  | 1,071 | 4,138 | - | 5,209 | 1,983 | 6,543 | - | 8,526 |
|  | ₩ 1,323,404 | 5,134,191 | 7,630 | 6,465,225 | 945,653 | 3,260,792 | 6,883 | 4,213,328 |

# **38. Reinsurance transaction history by insurance company**

Reinsurance transactions by insurance type for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Reinsurance expense(*) | Claims | Commissions | Subtotal | Reversal of insurance liability(*) |
| Individual insurance |  |  |  |  |  |
| Survival | ₩ 12,822 | 7,173 | 3,702 | 10,875 | (1,579) |
| Mortality | 430,818 | 128,476 | 39,933 | 168,409 | (246,869) |
| Endowment | 569 | 460 | 40 | 500 | (120) |
|  | 444,209 | 136,109 | 43,675 | 179,784 | (248,568) |
| Group insurance |  |  |  |  |  |
| Protection | 14 | 14 | (1) | 13 | (2) |
|  | ₩ 444,223 | 136,123 | 43,674 | 179,797 | (248,570) |

(*) It includes reinsurance premiums of ₩ 244,855 million, reinsurance income of ₩ 7,314 million and reversal of provision for insurance liability of ₩ 242,071 million incurred in accordance with underwriting of joint reinsurance.

|  | 2021 |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Reinsurance expense(*) | Claims | Commissions | Subtotal | Reversal of insurance liability(*) |
| Individual insurance |  |  |  |  |  |
| Survival | ₩ 5,782 | 3,299 | 1,657 | 4,956 | (506) |
| Mortality | 95,771 | 63,439 | 19,235 | 82,674 | (3,728) |
| Endowment | 306 | 141 | 113 | 254 | (7) |
|  | 101,859 | 66,879 | 21,005 | 87,884 | (4,241) |
| Group insurance |  |  |  |  |  |
| Protection | 5 | 1 | 4 | 5 | 1 |
|  | ₩ 101,864 | 66,880 | 21,009 | 87,889 | (4,240) |

140

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **39. General and administrative expenses**

General and administrative expenses for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Acquisition costs: |  |  |
| Proportional commission | ₩ 549,694 | 460,574 |
| Store operating expense | 13,065 | 13,571 |
| Sales promotion expense | 58,846 | 45,512 |
| Advertising expense | 31,519 | 19,187 |
| Others | 27,369 | 23,005 |
|  | 680,493 | 561,849 |
| Maintenance expense: |  |  |
| Salaries | 119,722 | 93,741 |
| Bonus | 44,609 | 36,629 |
| Retirement benefits | 18,361 | 11,153 |
| Voluntary retirement benefits | 7,671 | 83,640 |
| Employee benefits | 59,219 | 38,331 |
| Water, Lighting and Heating | 26,344 | 18,722 |
| Taxes and dues | 72,806 | 49,760 |
| Others | 175,305 | 145,897 |
|  | 524,037 | 477,873 |
| Deferred acquisition costs | (403,988) | (307,160) |
|  | ₩ 800,542 | 732,562 |

# **40. Investment administrative expenses**

The investment administrative expenses for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Salaries | ₩ 9,900 | 7,964 |
| Bonus | 3,761 | 3,465 |
| Retirement benefits | 1,212 | 935 |
| Voluntary retirement benefits | - | 2,953 |
| Employment benefits | 4,962 | 3,194 |
| Communication expenses | 139 | 121 |
| Fees | 9,415 | 7,075 |
| Taxes and dues | 722 | 449 |
| Others | 5,196 | 3,813 |
|  | ₩ 35,307 | 29,969 |

141

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **41. Net interest income**

(a) Interest income for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 |
| --- | --- | --- |
| Interest income: |  |  |
| Cash and deposits at amortized cost | ₩ | 34,547 |
| Deposits at FVTPL |  | 1,329 |
| Securities at FVTPL |  | 31,800 |
| Financial assets at FVOCI |  | 356,204 |
| Securities at amortized cost |  | 819,541 |
| Loans at amortized cost |  | 420,106 |
| Others |  | 4,841 |
|  | ₩ | 1,668,368 |
|  |  | 2021 |
| Interest income: |  |  |
| Cash and deposits at amortized cost | ₩ | 18,465 |
| Deposits at FVTPL |  | 1,298 |
| Securities at FVTPL |  | 25,610 |
| Financial assets at FVOCI |  | 233,889 |
| Securities at amortized cost |  | 592,258 |
| Loans at amortized cost |  | 351,969 |
| Others |  | 2,587 |
|  | ₩ | 1,226,076 |

(b) Interest expenses for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Interest expense: |  |  |  |
| Overdraft | ₩ | - | 34 |
| Interest on borrowings |  | 16 | - |
| Bond issued |  | 31,264 | 28,649 |
| Interest on lease liabilities |  | 2,588 | 1,423 |
| Others |  | 3,109 | 1,385 |
|  | ₩ | 36,977 | 31,491 |

# **42. (Reversal of) Provision for credit loss allowance**

Details of provision for credit loss allowance (reversal) for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Reversal | Securities at FVOCI | ₩ 1,536 | 645 |
|  | Other financial assets at amortized costs | 913 | 41 |
|  | Receivables at amortized cost(*) | 403 | 2 |
|  | Undrawn loan commitment | 86 | - |
|  |  | ₩ 2,938 | 688 |
| Provisions | Securities at FVOCI | 544 | 3,237 |
|  | Securities at amortized costs | 91 | 3,081 |
|  | Loans at amortized costs | 11,104 | 2,039 |
|  | Receivables at amortized cost(*) | 6,096 | 11,560 |
|  | Undrawn loan commitment | - | 83 |
|  |  | 17,835 | 20,000 |
|  |  | ₩ 14,897 | 19,312 |

(*) It includes reversal of credit loss allowances for due from banks at amortized cost.

142

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **43. Gain and losses on foreign exchange transactions**

Details of foreign exchange transaction income for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Gain on foreign exchange transactions: |  |  |  |
| Foreign transactions | W | 46,806 | 51,775 |
| Translations |  | 171,705 | 208,913 |
|  |  | 218,511 | 260,688 |
| Loss on foreign exchange transactions: |  |  |  |
| Foreign transactions |  | 18,124 | 10,451 |
| Translations |  | 84,684 | 42,498 |
|  |  | 102,808 | 52,949 |
|  | W | 115,703 | 207,739 |

# **44. Fees and commission income**

Details of fees and commission income for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Credit related fees | W | 1,990 | 1,998 |
| Loan commissions |  | 4,963 | 2,155 |
| Retirement pension management fee |  | 2,043 | 2,428 |
| Other fees and commissions in won |  | 1,790 | 343 |
|  | W | 10,786 | 6,924 |

# **45. Dividend income**

Dividend income for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Financial assets at FVTPL | W | 6,114 | 5,757 |
| Securities at FVOCI |  | 1,389 | 1,389 |
|  | W | 7,503 | 7,146 |

# **46. Other operating income or expenses**

(a) The other operating income for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Rental income | W | 2,235 | 3,039 |
| Others (*) |  | 14,201 | 1,258 |
|  | W | 16,436 | 4,297 |

(*) It includes gain from the disposal of loans at amortized cost.

(b) The other operating expenses for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Investment property depreciation | W | 212 | 212 |
| Others (*) |  | 4,252 | 1,713 |
|  | W | 4,464 | 1,925 |

(*) It includes loss from the disposal of loans at amortized cost.

143

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **47. Non-operating income or expenses**

|  | 2022 | 2021 |
| --- | --- | --- |
| Non-operating income: |  |  |
| Gain on disposal of associates’ investment asset | ₩ 343 | - |
| Gain on cancellation of right-of-use asset | 103 | 1,766 |
| Gain on disposal of property and equipment | 176 | 85 |
| Reverse on the impairment of intangible asset | - | 308 |
| Miscellaneous gains | 1,918 | 6,505 |
|  | 2,540 | 8,664 |
| Non-operating expenses |  |  |
| Loss on valuation of associates’ investment asset | 686 | - |
| Loss on cancellation of right-of-use asset | 416 | 1,905 |
| Loss on disposal of property and equipment | 690 | 255 |
| Impairment of property and equipment | - | 7,594 |
| Impairment of intangible assets | 13 | 11 |
| Donations | 6,372 | 3,391 |
| Miscellaneous loss | 16,173 | 22,394 |
|  | 24,350 | 35,550 |
|  | ₩ (21,810) | (26,886) |

# **48. Income tax expense**

(a) Income tax expense for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Current income tax expense | ₩ 18,632 | 33,351 |
| Adjustment for prior periods | (14,821) | 563 |
| Temporary differences | (600,406) | (66,188) |
| Income tax recognized in other comprehensive income | 725,083 | 95,692 |
| Income tax expenses | ₩ 128,488 | 63,418 |
| Effective tax rate | % 21.45 | 25.88 |

(b) The adjustments between net income before tax and income tax for the years ended December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Profit before income taxes | ₩ 598,959 | 245,065 |
| Income taxes at statutory tax rates | 164,714 | 67,393 |
| Adjustments: |  |  |
| Non-taxable income | (5,459) | (1,143) |
| Non-deductible expense | 690 | 1,364 |
| Separate tax effect | 3,032 | 3,219 |
| Differences in tax rates | (2,652) | (4,634) |
| Changes in deferred tax due to change in tax rate | (21,943) | - |
| Other | (9,894) | (2,781) |
| Income tax expense | ₩ 128,488 | 63,418 |
| Effective tax rate | % 21.45 | 25.88 |

(*) For the year ended December 31, 2022, the Company is conducting an administrative lawsuit against one case (the claim amount of ₩ 8,979 million), which has tax uncertainty, but it is highly likely to win, hence, it was reflected as corporate tax assets and corporate tax expenses.

144

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **48. Income tax expense (continued)**

(c) Deferred tax expenses by origination and reversal of deferred assets and liabilities and temporary differences for the years ended December 31, 2022 and 2021, are as follows:

|  |  | 2022 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | Beginning Balance | Profit or loss | Other comprehensive income | Adjustments | Ending Balance |
| Deposits in foreign currency | W | (45) | (152) | - | - | (197) |
| Financial assets at fair value through profit or loss |  | (61,202) | (1,226) | 82,102 | - | 19,674 |
| Financial assets at fair value through other comprehensive income |  | 60,759 | (34,119) | 614,040 | - | 640,680 |
| Securities at amortized costs |  | (574,559) | (73,173) | - | - | (647,732) |
| Investments in associates |  | 1,293 | (1,111) | - | - | 182 |
| Derivative instruments |  | 38,056 | (8,859) | 34,945 | - | 64,142 |
| Accrued income |  | (135,711) | 11,967 | - | - | (123,744) |
| Evaluation cost of initial investment fund |  | 244 | (336) | - | - | (92) |
| Deemed dividend |  | (10,153) | 15,558 | - | - | 5,405 |
| Dividend receivables |  | 124 | (5) | - | - | 119 |
| Other liabilities |  | 123 | (245) | - | - | (122) |
| Provisions |  | 5,260 | (3,630) | - | - | 1,630 |
| Dividend cost recovery |  | 35,155 | (11,729) | - | - | 23,426 |
| Taxation of partnership |  | 1,662 | 3,617 | - | - | 5,279 |
| Guaranteed reserve |  | 85,267 | (5,744) | - | - | 79,523 |
| Policyholder dividend reserve |  | 1,609 | (59) | - | - | 1,550 |
| Reserve for loss from participating insurance |  | 262 | 44 | - | - | 306 |
| Reserve for outstanding claims for maturity contracts |  | 9,622 | 2,537 | - | - | 12,159 |
| Deferred acquisition costs |  | (829) | 164 | - | - | (665) |
| Property and equipment, intangible assets |  | 15,906 | (5,369) | - | - | 10,537 |
| Other accrued expense |  | 32,903 | (7,382) | - | - | 25,521 |
| Gain or loss on deferred loan |  | (466) | (264) | - | - | (730) |
| Share-based payment |  | 2,064 | 125 | - | 25 | 2,214 |
| Retirement benefit obligation |  | 4,893 | (8,506) | (6,030) | - | (9,643) |
| Business use cars (depreciation adjustment) |  | 28 | (2) | - | - | 26 |

145

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **48. Income tax expense (continued)**

(c) Deferred tax expenses by origination and reversal of deferred assets and liabilities and temporary differences for the years ended December 31, 2022 and 2021, are as follows (continued):

|  |  | 2022 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | Beginning Balance | Profit or loss | Other comprehensive income | Adjustments | Ending Balance |
| Subordinated foreign currency bonds | ₩ | 6,131 | 7,364 | - | - | 13,495 |
| Outstanding interests |  | (12) | (12) | - | - | (24) |
| Accrued interests (deposit) |  | (1) | 7 | - | - | 6 |
| Right-of-use assets |  | (1,501) | 415 | - | - | (1,086) |
| Unpaid allowance |  | 36 | (24) | - | - | 12 |
| Government subsidies |  | 17 | (8) | - | - | 9 |
| Loan |  | 1,791 | (65) | - | - | 1,726 |
| Deficit carried forward |  | 15,241 | (4,718) | - | - | 10,523 |
| Deferred tax asset - capital loss |  | (272) | 272 | - | - | - |
| Hybrid bonds |  | 208 | (8) | - | - | 200 |
|  | ₩ | (466,097) | (124,676) | 725,057 | 25 | 134,309 |

(*) The corporate tax rate has changed due to the revision of the tax law at the end of 2022, hence tax rate of 26.5% is applied for deferred tax assets (liabilities) expected to be realized after 2023.

146

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **48. Income tax expense (continued)**

(c) Deferred tax expenses by origination and reversal of deferred assets and liabilities and temporary differences for the years ended December 31, 2022 and 2021, are as follows (continued):

|  | 2021 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Beginning Balance | Changes due to merger | Profit or loss | Other comprehensive income | Adjustments | Ending Balance |
| Deposits in foreign currency | W 240 | - | (285) | - | - | (45) |
| Financial assets at fair value through profit or loss | (22,268) | (22,423) | 14,792 | (31,303) | - | (61,202) |
| Financial assets at fair value through other comprehensive income | (13,570) | (16,768) | (57,826) | 148,923 | - | 60,759 |
| Securities at amortized costs | (182,634) | (304,656) | (87,269) | - | - | (574,559) |
| Investments in associates | 1,293 | - | - | - | - | 1,293 |
| Derivative instruments | (23,828) | 3,611 | 79,124 | (20,851) | - | 38,056 |
| Accrued income | (69,556) | (69,565) | 3,410 | - | - | (135,711) |
| Evaluation cost of initial investment fund | 73 | (56) | 227 | - | - | 244 |
| Deemed dividend | (4,459) | (856) | (4,838) | - | - | (10,153) |
| Dividend receivables | 124 | - | - | - | - | 124 |
| Other liabilities | 225 | 113 | (215) | - | - | 123 |
| Provisions | 4,505 | - | 755 | - | - | 5,260 |
| Dividend cost recovery | 14,904 | 16,118 | 4,133 | - | - | 35,155 |
| Taxation of partnership | 611 | - | 1,051 | - | - | 1,662 |
| Guaranteed reserve | 23,426 | 57,159 | 4,682 | - | - | 85,267 |
| Policyholder dividend reserve | 1,609 | - | - | - | - | 1,609 |
| Excess participating policyholder dividend reserve | 130 | - | 132 | - | - | 262 |
| Reserve for outstanding claims for maturity contracts | 3,099 | 3,246 | 3,277 | - | - | 9,622 |
| Deferred acquisition costs | (994) | - | 165 | - | - | (829) |
| Property and equipment, intangible assets | 819 | 9,909 | 5,178 | - | - | 15,906 |
| Other accrued expense | 10,089 | 8,233 | 14,581 | - | - | 32,903 |
| Gain or loss on deferred loan | 135 | - | (601) | - | - | (466) |
| Share-based payment | 1,563 | - | 398 | - | 103 | 2,064 |
| Retirement benefit obligation | 1,744 | (1,085) | 5,414 | (1,180) | - | 4,893 |
| Donation payable | 55 | - | (55) | - | - | - |

147

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **48. Income tax expense (continued)**

(c) Deferred tax expenses by origination and reversal of deferred assets and liabilities and temporary differences for the years ended December 31, 2022 and 2021, are as follows (continued):

|  | 2021 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Beginning Balance | Changes due to merger | Profit or loss | Other comprehensive income | Adjustments | Ending Balance |
| Business use cars (depreciation adjustment) ₩ | 28 | - | - | - | - | 28 |
| Subordinated foreign currency bonds | (3,253) | - | 9,384 | - | - | 6,131 |
| Outstanding interests | (13) | - | 1 | - | - | (12) |
| Accrued interests (deposit) | 19 | - | (20) | - | - | (1) |
| Right-of-use assets | (370) | 96 | (1,227) | - | - | (1,501) |
| Unpaid allowance | 12 | 1,243 | (1,219) | - | - | 36 |
| Government subsidies | 28 | 15 | (26) | - | - | 17 |
| Loan | 1,791 | - | - | - | - | 1,791 |
| Deficit carried forward | 18,181 | - | (2,940) | - | - | 15,241 |
| Deferred tax asset - capital loss | (342) | - | 70 | - | - | (272) |
| Hybrid bonds | 208 | - | - | - | - | 208 |
| ₩ | (236,376) | (315,666) | (9,747) | 95,589 | 103 | (466,097) |

148

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **48. Income tax expense (continued)**

(d) Deferred income tax related to items recognized in profit or loss as of December 31, 2022 and 2021, are as follows:

|  | January 1, 2022 (*1) |  | Changes |  | December 31, 2022 |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Amount | Tax effect | Amount | Tax effect | Amount | Tax effect |
| Financial assets measured at FVOCI | ₩ (197,211) | 54,233 | (2,325,985) | 614,040 | (2,523,196) | 668,273 |
| Financial asset measured at FVTPL (Overlay approach) | 279,197 | (76,779) | (299,490) | 82,102 | (20,293) | 5,323 |
| The accumulated other comprehensive income in separate account (*) | (31,516) | 8,667 | (153,594) | 40,387 | (185,110) | 49,054 |
| Remeasurement of the defined benefit liability | (31,049) | 8,539 | 21,583 | (6,030) | (9,466) | 2,509 |
| Stock options | 2,011 | (553) | (19) | 25 | 1,992 | (528) |
| Gains(losses) on valuation of derivative for cash flow hedge | 48,714 | (10,867) | (133,727) | 34,945 | (85,013) | 24,078 |
| Hybrid bonds | (756) | 208 | 1 | - | (755) | 208 |
|  | ₩ 69,390 | (16,552) | (2,891,231) | 765,469 | (2,821,841) | 748,917 |

(*) Deferred tax effects, which are originated from the accumulated other comprehensive income in separate account, were included in the other liabilities of separate account's financial statement.

|  | January 1, 2021 |  | Changes due to merger |  | Changes |  | December 31, 2021 |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Amount | Tax effect | Amount | Tax effect | Amount | Tax effect | Amount | Tax effect |
| Financial assets measured at FVOCI | ₩ 104,691 | (28,790) | 107,094 | (29,451) | (408,996) | 112,474 | (197,211) | 54,233 |
| Financial asset measured at FVTPL (Overlay approach) | 165,367 | (45,476) | 132,527 | (36,444) | (18,697) | 5,141 | 279,197 | (76,779) |
| The accumulated other comprehensive income in separate account (*) | 24,664 | (6,783) | (1,616) | 444 | (54,564) | 15,006 | (31,516) | 8,667 |
| Remeasurements of the defined benefit liability | (23,907) | 6,575 | (11,434) | 3,144 | 4,292 | (1,180) | (31,049) | 8,539 |
| Stock options | 2,351 | (656) | - | - | (340) | 103 | 2,011 | (553) |
| Gains(losses) on valuation of derivative for cash flow hedge | (26,089) | 7,174 | 74,860 | (20,587) | (57) | 2,546 | 48,714 | (10,867) |
| Hybrid bonds | (756) | 208 | - | - | - | - | (756) | 208 |
|  | ₩ 246,321 | (67,748) | 301,431 | (82,894) | (478,362) | 134,090 | 69,390 | (16,552) |

(*) Deferred tax effects, which are originated from the accumulated other comprehensive income in separate account, were included in the other liabilities of separate account's financial statement.

(e) Current tax assets and liabilities

Current tax assets and liabilities as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Current tax assets |  |  |
| Income tax receivables (Separate tax refund amount) | ₩ 115,449 | 47,502 |

149

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **48. Income tax expense (continued)**

# (f) Income taxes based on gross amount

Deferred income tax assets and deferred income tax liabilities and current income tax assets and current income tax liabilities as of December 31, 2022 and 2021, are as follows:

|  | 2022 | 2021 |
| --- | --- | --- |
| Deferred tax assets | ₩ 918,344 | 318,654 |
| Deferred tax liabilities | (784,035) | (784,751) |
| Current tax assets | 115,449 | 47,502 |

# **49. Commitments and contingencies**

# (a) Insurance agreement

As of December 31, 2022, the total number and amount of contracts held by the Company under various insurance contracts with customers is 6,840,971 contracts and ₩191,007,387 million respectively (6,908,943 contracts and ₩196,146,626 million, respectively for the year ended December 31, 2021).

# (b) Reinsurance agreements

As of December 31, 2022, the Company has entered a re-insurance contract with Korean Reinsurance Company, Reinsurance Group of America Incorporated ('RGA'), Gen Re, Munich Re, Hannover Re, SCOR, PartnerRe and COVEA on cancer insurance contracts, cerebrovascular and heart disease (DP), fatal diseases (CI), death and dementia collateral. For life insurance contracts, the Company has entered a joint reinsurance with Korean Reinsurance Co., Ltd. which proportionally reinsures insurance risks and interest rate risks. In accordance with these agreements, the Company is paying reinsurance premiums to the above reinsurance companies.

# (c) Pending litigations

For the year ended December 31, 2022, the Company has 55 pending litigations (Total claim amount of ₩ 4,113 million). Among these, provisions related to the litigation is accounted for ₩ 809 million, and the Company has accounted for ₩ 3,991 million as insurance liability (policy reserves) related to insurance claims. As of December 31, 2022, the result of litigation is unpredictable.

# (d) Overdraft agreement

As of December 31, 2022, the Company has overdraft agreements with Shinhan Bank. The limit on overdraft is ₩400,000 million (₩130,000 million as of December 31, 2021).

# (e) Unsettled credit grant and contribution commitments

As of December 31, 2022, the Company's unexecuted credit contribution and contribution commitments amounted to ₩436,191 and ₩1,626,048 million, respectively (₩460,691 and ₩1,222,778 million, respectively as of December 31, 2021).

# (f) Other commitments

As of December 31, 2022 and 2021, the details of payment guarantee are as follows.

| Guarantee provider | 2022 | 2021 | Type of guarantee |
| --- | --- | --- | --- |
| Seoul Guarantee Insurance Co., Ltd. | ₩ 2,432 | 1,469 | Deposit etc. |

150

# SHINHAN LIFE INSURANCE CO., LTD.
Notes to the Separate Financial Statements
December 31, 2022 and 2021
(In millions of won)

# 50. Related parties

Intra-group balances, and income and expenses arising from intra-group transactions are eliminated in preparing the separate financial statements.

(a) The related parties as of December 31, 2022, are as follows:

| The parent company | Shinhan Financial Group |
| --- | --- |
| Subsidiaries | Shinhan Financial Plus Co., Ltd Shinhan Life Insurance Vietnam Co., Ltd. Shinhan CubeOn Co., Ltd. Miraeasset Maps Global Infra Private Special Asset Trust 2 Mirae Asset Maps US Frontier Private Real Estate Investment Trust 5-2 Shinhan AIM Credit Fund 3 Shinhan AIM Private fund of funds Trust 7-A Shinhan AIM Private fund of funds Trust 6-B Shinhan AIM Private fund of funds Trust 5 KB Global Private Real Estate Debt Fund 23 KB Global Private Real Estate Debt Fund 21 |
| Entities under common control | Shinhan Bank Co., Ltd. Shinhan Securities Co., Ltd.(*1) Shinhan Card Co., Ltd. Jeju Bank Shinhan DS Shinhan Asset Management Co., Ltd. Shinhan Capital Co., Ltd. Shinhan Savings Bank Shinhan Aitas SHC Management Co., Ltd. Shinhan REITs Management Co., Ltd. Shinhan AI Co., Ltd. Shinhan Asset Trust Co., Ltd. Shinhan Venture Investment Co., Ltd. Shinhan EZ General Insurance, Ltd.(*2) SHBNPP Green Energy Private Special Asset Investment Trust SHBNPP Hangbok Ultari BTL Private Special Asset Investment Trust SHBNPP YoungNam LNG Thermal Power Plant Private Special Asset Investment Trust SHBNPP Green Energy Professional Investment Type Private Special Asset Investment Trust No.2 SHBNPP Good morning BTL Professional Investment Type Private Special Asset Investment Trust No.1 SHBNPP Global Professional Investment Type Private Real Estate Investment Trust No.4 SHBNPP Global Professional Investment Type Private Real Estate Investment Trust No.5 SHBNPP US Nebada Photovoltaic Private Special Asset Investment Trust Shinhan AIM Social Enterprise Investment Fund I |

151

# SHINHAN LIFE INSURANCE CO., LTD.  
**Notes to the Separate Financial Statements**  
December 31, 2022 and 2021  
*(In millions of won)*

# **50. Related parties (continued)**

Intra-group balances, and income and expenses arising from intra-group transactions are eliminated in preparing the separate financial statements (continued).

(a) The related parties as of December 31, 2022, are as follows (continued):

# **Entities under common control**

---

Shinhan AIM Infrastructure Professional  
Investment Type Private Investment Trust 1  
One Shinhan Futures Fund 1  
SH BNPP Startup Venture Specialized Investment  
Private Equity Trust No.2  
SHBNPP Global Professional Investment Type  
Private Investment Trust No.12  
Shinhan AIM Private Real Estate Investment Trust  
No.15  
Shinhan AIM FoF Fund 4  
Shinhan AIM Social Enterprise Investment Fund II  
SHBNPP Europe Corporate Loan Professional  
Investment Type Private Investment Trust No.4  
Shinhan AIM Private Real Estate Investment Trust  
No.13  
Shinhan AIM FoF Fund 6-A  
SHBNPP Italy VENETA Infrastructure Loan  
Professional Investment Type Private Investment  
Trust  
SH BNPP Startup Venture Specialized Investment  
Private Equity Trust No.3  
One Shinhan Futures Fund 2  
SH BNPP Startup Venture Alpha Specialized  
Investment Private Equity Mixed Asset Trust  
No.1  
SHBNPP Green New Deal Energy Professional  
Investment Type Private Special Asset  
Investment Trust No.1  
Shinhan AIM Investment Finance Specialized  
Investment Trust No. 1  
Shinhan AIM Social Enterprise Investment Fund  
III  
SH Startup Venture Specialized Investment Private  
Equity Trust No.4  
SH Green New Deal Energy Special Asset Private  
Investment Trust No.3  
Shinhan AIM Private Real Estate Investment Trust  
No.22-A  
One Shinhan Connect New Technology  
Investment Fund 1  
Shinhan Global Green Energy Partnership Private  
Investment Trust No.1  
SHBNPP Startup Venture Alpha Specialized  
Private Equity Fund 2nd  
One Shinhan Futures Fund 3  
SH Startup Venture Private Equity Trust No.5  
Shinhan Greenway Corporate Investment FUND  
NO.1

152

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **50. Related parties (continued)**

Intra-group balances, and income and expenses arising from intra-group transactions are eliminated in preparing the separate financial statements (continued).

(a) The related parties as of December 31, 2022, are as follows (continued):

| Entities under common control | One Shinhan Connect New Technology Investment Fund 2 Shinhan global flagship venture fund 1 SH BGT Private Special Asset Investment Trust No.2 |
| --- | --- |
| Associates | iPIXEL Co.,Ltd. IMM Long-term Solution Private Equity Fund Find JD Fund No.1 |
| Associates of entities under common control | Seocho Information Command Complex Development Project PFV1 Seocho Information Command Complex Development Project PFV2 Midas Asset Global CRE Debt Private Fund No.6 Vestas Qualified Investors Private Real Estate Fund Investment Trust No.37 LB Scotland Amazon Fulfillment Center Fund 29 SHINHAN-NEO Core Industrial Technology Fund SHINHAN-NEO Market-Frontier 2nd Fund SHBNPP Senior Loan Professional Investment Type Private Mixed Asset Investment Trust No.3 SHBNPP Senior Loan Professional Investment Type Private Mixed Asset Investment Trust No.2 Deutsche Global Professional Investment Type Private Real Estate Investment Trust No. 24 Macquarie Korea Opportunities Fund(MKOF) SHBNPP Sangju YC Expressway Professional Investment Type Private Special Asset Investment Trust Shinhan AIM Private Real Estate Investment Trust No.1 Shinhan AIM Private Real Estate Investment Trust No.2 SHBNPP Japan Photovoltaic Private Special Asset Investment Trust No.2 [Loan-Derivative] PCC Amberstone Private Equity Fund I KIAMCO POWERLOAN TRUST 4TH SHBNPP Green New Deal Energy Professional Investment Type Private Special Asset Investment Trust No.2 Shinhan JigaeNamsan Road Private Special Asset Investment Trust |
| Others | Shinhan Life Shining Foundation |

(*1) It has changed its company name to Shinhan Securities Co., Ltd. from Shinhan Investment corp. during the period.

(*2) During the period, it was incorporated into a subsidiary of Shinhan Financial Group, and its name was changed from BNP Paribas Cardif General Insurance to Shinhan EZ General Insurance, Ltd.

153

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **50. Related parties (continued)**

(b) Significant balances with the related parties as of December 31, 2022 and 2021, are as follows:

| Related party | Account | 2022 | 2021 |
| --- | --- | --- | --- |
| The parent company |  |  |  |
| Shinhan Financial Group | Securities at fair value through other comprehensive income | ₩ 26,698 | 50,914 |
|  | Accrued income | 167 | 250 |
|  | Allowance for bad debt | (20) | (42) |
|  | Current tax assets | 115,449 | 47,508 |
|  | Accrued expenses | 8,354 | 7,507 |
| Subsidiaries |  |  |  |
| Shinhan Financial Plus Co., Ltd | Right-of-use asset | 1,699 | 1,044 |
|  | Rental deposit | 188 | 149 |
|  | Lease liability | 1,644 | 1,020 |
|  | Account payables | 153 | - |
|  | Accrued expenses | 705 | 625 |
| Shinhan CubeOn Co., Ltd. | Other assets | - | 290 |
| Entities under common control |  |  |  |
| Shinhan Bank | Cash and due from banks at amortized cost | 8,599 | 100,727 |
|  | Financial assets at fair value through profit or loss(*1) | 2,494 | 1,793 |
|  | Rental deposits | 11,128 | 10,207 |
|  | Right-of-use assets | 4,742 | 5,432 |
|  | Derivative assets | 31,221 | 2,282 |
|  | Accrued income | 149 | 301 |
|  | Derivative liabilities | 16,782 | 21,881 |
|  | Lease liabilities | 4,789 | 5,163 |
|  | Accrued expenses | 1,178 | 130 |
|  | Separate account liabilities(*2) | 121,213 | 156,326 |
| Shinhan Securities Co., Ltd. | Cash and due from banks at amortized cost | - | 14,449 |
|  | Rental deposits | - | 2,878 |
|  | Accrued income | 113 | 131 |
|  | Allowance for bad debts | - | (20) |
|  | Derivative assets | 2,440 | 21 |
|  | Right-of-use assets | - | 52 |
|  | Derivative liabilities | 36,082 | 821 |
| Shinhan Card Co., Ltd.(*3) | Securities at fair value through other comprehensive income | 28,712 | 30,184 |
|  | Accounts receivable | 30 | 57 |
|  | Accrued income | 128 | 144 |
|  | Allowance for bad debts | (4) | (35) |
|  | Accrued expenses | 3,408 | 5,215 |
|  | Separate account liabilities(*2) | 33,236 | 32,555 |
| Jeju Bank | Cash and due from banks at amortized cost | 6 | 3 |
|  | Separate account liabilities(*2) | 8,366 | - |
|  | Accrued expenses | 56 | 32 |
| Shinhan DS | Accrued expenses | 301 | 1,024 |
| Shinhan Asset Management Co., Ltd. | Financial assets at fair value through profit or loss(*1) | 4,368 | - |
|  | Accrued expenses | 580 | 117 |
| Shinhan Alternative Investment Management Inc.(*4) | Financial assets at fair value through profit or loss(*1) | - | 3,248 |
| Shinhan AI Co., Ltd. | Prepayments | 27 | - |
|  | Accrued expenses | - | 475 |
| Total assets |  | ₩ 238,146 | 271,818 |
| Total liabilities |  | ₩ 237,035 | 233,040 |

154

# **SHINHAN LIFE INSURANCE CO., LTD.**  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **50. Related parties (continued)**

(b) Significant balances with the related parties as of December 31, 2022 and 2021, are as follows (continued):

(*1) It is a financial instrument related to a separate structured entity of related parties.

(*2) It is reserve for policyholders of retirement benefits.

(*3) During the period, Shinhan Credit Information Co., Ltd. was acquired by Shinhan Card Co., Ltd, the amount includes accrued expenses to Shinhan Credit Information Co., Ltd.

(*4) Shinhan Asset Management Co., Ltd and Shinhan Alternative Investment Management Inc. has merged on January 5, 2022, and the name of the Company has changed to Shinhan Asset Management Co., Ltd.

(c) Significant transactions with the related parties for the years ended December 31, 2022 and 2021, are as follows:

| Related Party | Account | 2022 | 2021 |
| --- | --- | --- | --- |
| The parent company |  |  |  |
| Shinhan Financial Group | Interest income | 868 | 667 |
|  | Maintenance expense | 5,360 | 2,886 |
|  | Provision (Reversal) of allowance for bad debt | (20) | 19 |
| Entities under common control |  |  |  |
| Shinhan Bank | Interest income(*1) | 1,102 | (317) |
|  | Fee and commission income | 569 | 614 |
|  | Valuation gain of derivatives | 27,617 | 3,930 |
|  | Transaction gain of derivatives | 2,950 | 857 |
|  | Gain on foreign currency transaction | - | 4,872 |
|  | Income related to financial assets measures at FVTPL(*4) | 20 | 3 |
|  | Acquisition costs(*7) | 7,573 | 3,111 |
|  | Maintenance expense | 5,163 | 4,607 |
|  | Interest expense | 120 | 306 |
|  | Valuation loss of derivatives | 16,280 | 17,515 |
|  | Transaction loss of derivatives | 32,925 | 19,004 |
| Shinhan Securities Co., Ltd. | Interest income | 62 | 62 |
|  | Fee and commission income | 475 | 565 |
|  | Valuation gain of derivatives | 82 | - |
|  | Acquisition costs(*7) | 1 | 1 |
|  | Maintenance expense | 139 | 212 |
|  | Investment management expense | - | 50 |
|  | Provision (Reversal) of allowance for bad debt | (5) | 20 |
|  | Valuation loss of derivatives | 1,827 | 733 |
|  | Transaction loss of derivatives | 24 | 216 |
| Shinhan Card Co., Ltd.(*5) | Interest income | 759 | 381 |
|  | Fee and commission expense | 43 | 333 |
|  | Miscellaneous income | - | 11 |
|  | Acquisition costs(*7) | 9,379 | 10,193 |
|  | Maintenance expense | 7,481 | 5,513 |
|  | Provision (Reversal) of allowance for bad debt | (4) | 14 |
| Orange Life Insurance Co., Ltd.(*6) | Interest income | - | 12 |
|  | Other income | - | 1,129 |
|  | Miscellaneous income | - | 11 |
|  | Maintenance expense | - | 1,085 |
|  | Interest expense | - | 8 |
| Jeju Bank | Acquisition costs (*7) | 581 | 645 |
|  | Maintenance expense | 14 | 13 |
| Shinhan DS | Other income | 1 | 417 |
|  | Maintenance expense | 16,389 | 11,988 |
| Shinhan Asset Management Co., Ltd. | Investment management expense | 2,011 | 722 |
| Shinhan Aitas | Maintenance expense | 12 | - |
| Shinhan Savings Bank | Fee and commission income | 8 | 16 |
| Shinhan AI Co., Ltd. | Other income | - | 10 |
|  | Investment management expense | 1,244 | 1,848 |

155

# **SHINHAN LIFE INSURANCE CO., LTD.**  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **50. Related parties (continued)**

(c) Significant transactions with the related parties for the years ended December 31, 2022 and 2021, are as follows (continued):

| Related Party | Account | 2022 | 2021 |
| --- | --- | --- | --- |
| Entities under common control |  |  |  |
| SHBNPP Green Energy Private Special Asset Investment Trust | Income related to financial assets measures at FVTPL | ₩ 1,037 | 989 |
| SHBNPP Hangbok Ultari BTL Private Special Asset Investment Trust | Income related to financial assets measures at FVTPL | 1,119 | 1,169 |
| SHBNPP YoungNam LNG Thermal Power Plant Private Special Asset Investment Trust | Income related to financial assets measures at FVTPL | 892 | 812 |
| SHBNPP Green Energy Professional Investment Type Private Special Asset Investment Trust No.2 | Income related to financial assets measures at FVTPL | 769 | 1,032 |
| SHBNPP Good morning BTL Professional Investment Type Private Special Asset Investment Trust No.1 | Income related to financial assets measures at FVTPL | 116 | 236 |
| SHBNPP Global Professional Investment Type Private Real Estate Investment Trust No.4 | Income related to financial assets measures at FVTPL | 1,702 | 1,596 |
| SHBNPP Global Professional Investment Type Private Real Estate Investment Trust No.5 | Income related to financial assets measures at FVTPL | 2,190 | 1,875 |
| SHBNPP Global Professional Investment Type Private Real Estate Investment Trust No.6(*2) | Income related to financial assets measures at FVTPL | - | 629 |
| SHBNPP US Nebada Photovoltaic Private Special Asset Investment Trust | Income related to financial assets measures at FVTPL | 2,726 | 1,425 |
| SHBNPP Future Energy Professional Investment Type Private Special Asset Investment Trust No.1 | Income related to financial assets measures at FVTPL | 198 | 411 |
| SHBNPP Green Energy Professional Investment Type Private Special Asset Investment Trust No.6(*2) | Income related to financial assets measures at FVTPL | - | 144 |
| Shinhan AIM Infrastructure Professional Investment Type Private Investment Trust 1 | Income related to financial assets measures at FVTPL | 2,200 | 842 |
| SHBNPP Europe Corporate Loan Professional Investment Type Private Investment Trust No.4 | Income related to financial assets measures at FVTPL | 1,844 | 944 |
| SHBNPP Italy VENETA Infrastructure Loan Professional Investment Type Private Investment Trust | Income related to financial assets measures at FVTPL | 1,051 | 1,089 |
| SHBNPP Green New Deal Energy Professional Investment Type Private Special Asset Investment Trust No.1 | Income related to financial assets measures at FVTPL | 835 | 434 |
| SH Green New Deal Energy Special Asset Private Investment Trust No.3 | Income related to financial assets measures at FVTPL | 275 | 37 |
| Shinhan AIM Private Real Estate Investment Trust No.22-A | Income related to financial assets measures at FVTPL | 1,810 | 539 |
| Shinhan AIM Social Enterprise Investment Fund I | Income related to financial assets measures at FVTPL | 47 | - |
| Shinhan AIM Investment Finance Specialized Investment Trust No. 1 | Income related to financial assets measures at FVTPL | 190 | - |
| Shinhan AIM FoF Fund 6-A | Income related to financial assets measures at FVTPL | 308 | - |
| SHBNPP Global Professional Investment Type Private Investment Trust No.12 | Income related to financial assets measures at FVTPL | 1,300 | 650 |
| Shinhan AIM Private Real Estate Investment Trust No.15 | Income related to financial assets measures at FVTPL | 438 | - |

156

# **SHINHAN LIFE INSURANCE CO., LTD.**  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **50. Related parties (continued)**

(c) Significant transactions with the related parties for the years ended December 31, 2022 and 2021, are as follows (continued):

| Related Party | Account | 2022 | 2021 |
| --- | --- | --- | --- |
| Entities under common control |  |  |  |
| Shinhan AIM FoF Fund 4 | Income related to financial assets measures at FVTPL | W 359 | - |
| Shinhan Global Green Energy Partnership Private Investment Trust No.1 | Income related to financial assets measures at FVTPL | 166 | - |
| Subsidiaries |  |  |  |
| Shinhan Financial Plus Co., Ltd | Other income | 750 | 220 |
|  | Acquisition costs(*7) | 10,649 | 9,277 |
|  | Interest expense | 50 | 20 |
|  | Other expenses | 843 | 160 |
| Shinhan Life Insurance Vietnam Co., Ltd. | Fee and commission income | 1,746 | - |
| SH overseas private investment trust(*2) | Income related to financial assets measures at FVTPL | - | 2 |
| Miraasset Maps Global Infra Private Special Asset Trust 2 | Income related to financial assets measures at FVTPL | 12,289 | 22,069 |
| Shinhan AIM Credit Fund 3 | Income related to financial assets measures at FVTPL | 6,119 | 5,464 |
| Shinhan AIM Private fund of funds Trust 5 | Income related to financial assets measures at FVTPL | 1,330 | 315 |
| Shinhan AIM Private fund of funds Trust 6-B | Income related to financial assets measures at FVTPL | 145 | - |
| KB Global Private Real Estate Debt Fund 21 | Income related to financial assets measures at FVTPL | 87 | - |
| Associates of entities under common control |  |  |  |
| Midas Asset Global CRE Debt Private Fund No.6 | Income related to financial assets measures at FVTPL | 1,876 | 1,975 |
| Vestas Qualified Investors Private Real Estate Fund Investment Trust No.37 | Income related to financial assets measures at FVTPL | 1,925 | 1,919 |
| LB Scotland Amazon Fulfillment Center Fund 29 | Income related to financial assets measures at FVTPL | 723 | 796 |
| SHBNPP Senior Loan Professional Investment Type Private Mixed Asset Investment Trust No.3 | Income related to financial assets measures at FVTPL | 188 | 292 |
| SHBNPP Senior Loan Professional Investment Type Private Mixed Asset Investment Trust No.2 | Income related to financial assets measures at FVTPL | 101 | 101 |
| Deutsche Global Professional Investment Type Private Real Estate Investment Trust No. 24 | Income related to financial assets measures at FVTPL | 785 | 699 |
| Shinhan AIM Private Real Estate Investment Trust No.1 | Income related to financial assets measures at FVTPL | 2,176 | 1,889 |
| SHBNPP Jigae Namsan BTO professional Investment Type Private Special Asset Investment Trust (*2) | Income related to financial assets measures at FVTPL | - | 279 |
| SHBNPP Japan Photovoltaic Private Special Asset Investment Trust No.2 | Income related to financial assets measures at FVTPL | 303 | 387 |
| Shinhan BNPP Global Infrastructure Private Investment Trust(*3) | Income related to financial assets measures at FVTPL | 183 | - |
| PCC Amberstone Private Equity Fund I | Income related to financial assets measures at FVTPL | 803 | 801 |
| KIAMCO POWERLOAN TRUST 4TH | Income related to financial assets measures at FVTPL | 1,537 | 1,465 |
| SHBNPP Green New Deal Energy Professional Investment Type Private Special Asset Investment Trust No.2 | Income related to financial assets measures at FVTPL | 987 | 635 |

157

# SHINHAN LIFE INSURANCE CO., LTD.  
 **Notes to the Separate Financial Statements**  
 December 31, 2022 and 2021  
 *(In millions of won)*

# **50. Related parties (continued)**

(c) Significant transactions with the related parties for the years ended December 31, 2022 and 2021, are as follows (continued):

| Related Party | Account | 2022 | 2021 |
| --- | --- | --- | --- |
| Associates of entities under common control |  |  |  |
| Shinhan JigaeNamsan Road Private Special Asset Investment Trust | Income related to financial assets measures at FVTPL | ₩ 139 | - |
| Others |  |  |  |
| Shinhan Life Shining Foundation | Rental income | 53 | 25 |
|  | Donations | 53 | 25 |
| Total income |  | ₩ 90,373 | 67,759 |
| Total expense |  | ₩ 118,089 | 90,191 |

(*1) It includes gains or losses from derivatives from hedging instruments.

(*2) It has been removed from the related party during the year ended December 31, 2021, the amount refers to the transactions before its removal.

(*3) It has been removed from the related party during the year ended December 31, 2022, the amount refers to the transactions before its removal.

(*4) It is investment gains and losses from separate structured entities of the related party.

(*5) During the period, Shinhan Credit Information Co., Ltd. was acquired by Shinhan Card Co., Ltd, and it includes fees and commission expenses attributable to Shinhan Credit Information Co., Ltd.

(*6) Orange Life Insurance Co., Ltd. has merged with the related party during the year ended December 31, 2021, the amount refers to the transactions before the merger.

(*7) Deferral or amortization of acquisition cost is excluded.

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