EX-99.1(D)

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Exhibit 99.1(D)

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Financial Statements

March 31, 2017 and 2016

KB Insurance Co., Ltd and Subsidiaries

Index

March 31, 2017 and 2016


	Page(s)

Report on Review of Interim Financial Statements		1~2

Consolidated Interim Financial Statements

Consolidated Interim Statements of Financial Position		3

Consolidated Interim Statements of Comprehensive Income		4~5

Consolidated Interim Statements of Changes in Equity		6~7

Consolidated Interim Statements of Cash Flows		8~9

Notes to the Consolidated Interim Financial Statements		10~66

Report on Review of Interim Financial Statements

(English Translation of a Report Originally Issued in Korean)

To the Shareholders and Board of Directors of

KB Insurance Co., Ltd

Reviewed Financial Statements

We have reviewed the accompanying consolidated interim financial statements of KB Insurance Co., Ltd and its subsidiaries (collectively the “Group”). These financial statements consist of the consolidated interim statement of financial position of the Group as of March 31, 2017, and the related consolidated interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2017 and 2016, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with the International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034, Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to issue a report on these consolidated interim financial statements based on our reviews.

We conducted our review in accordance with the quarterly and semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe the accompanying consolidated interim financial statements are not present fairly, in all material respects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.

Other Matters

We have audited the consolidated statement of financial position of the Group as of December 31, 2016, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, in accordance with auditing standards generally accepted in the Republic of Korea. We expressed an unqualified opinion on those financial statements in our audit report dated March 8, 2017. These financial statements are not included in this review report. The consolidated statement of financial position as of December 31, 2016, presented herein for comparative purposes, is consistent, in all material respects, with the above consolidated audited statement of financial position as of December 31, 2016.

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

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

May 11, 2017

The review report is effective as of May 11, 2017, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Financial Position

March 31, 2017 and December 31, 2016


(In Korean won)	Note		March 31, 2017 (Unaudited)			2016

Assets
Cash and cash equivalents		5,7,28		547,889,365,537			834,677,653,102
Financial assets at fair value through profit or loss		5,8,13,28		1,095,668,451,438			1,290,860,050,528
Available-for-sale financial assets		5,9,21,28		9,186,061,748,335			9,608,853,903,915
Held-to-maturity financial assets		5,10,28		4,621,482,073,884			3,546,090,842,448
Loans		5,11,28		6,591,408,176,350			6,828,086,779,469
Other receivables		5,11,21,28		767,225,758,879			733,382,030,999
Derivative assets to hedge		5,12		138,707,648,827			6,144,554,921
Reinsurance assets		13		730,250,847,201			764,918,770,769
Investment property		14,16		270,625,299,384			269,591,966,071
Property and equipment		15,16		784,351,627,266			791,933,899,454
Intangible assets		17		38,758,524,992			37,875,825,187
Assets held-for-sale		18		—			4,048,353,452
Current tax assets				10,883,680			—
Deferred tax assets				2,252,426,697			2,349,841,338
Deferred acquisition costs		19		1,655,774,190,931			1,669,657,180,374
Other assets		20		57,980,394,838			44,415,989,149
Separate account assets		45		3,258,716,128,103			3,006,009,542,068

Total assets				29,747,163,546,342			29,438,897,183,244


Liabilities
Insurance liabilities		22		22,889,438,622,636			22,470,369,354,945
Financial liabilities at fair value through profit or loss		5,12,23		1,380,000			9,391,492,083
Other financial liabilities		5,24,28		625,848,183,694			531,271,170,296
Derivative liabilities to hedge		5,12		5,865,147,802			147,320,144,868
Provisions		25		62,141,776,620			62,643,117,557
Net defined benefit liabilities		26		106,086,399,414			91,441,864,232
Current tax liabilities				44,544,233,039			7,968,037,388
Deferred tax liabilities				216,026,243,594			245,256,460,036
Other liabilities		27		36,129,572,446			40,238,867,784
Separate account liabilities		45		3,263,838,771,558			3,385,531,301,980

Total liabilities				27,249,920,330,803			26,991,431,811,169


Equity
Capital stock		29		33,250,000,000			33,250,000,000
Capital surplus		29		348,453,891,932			348,453,891,932
Capital adjustments		29		(8,508,615	)		(8,508,615	)
Accumulated other comprehensive income		29		191,175,208,074			201,183,492,288
Accumulated other comprehensive income of assets held for sale		29		—			314,081,671
Retained earnings		29		1,920,183,437,572			1,859,865,209,578

Equity attributable to shareholders of the Parent Company				2,493,054,028,963			2,443,058,166,854
Non-controlling interests		1,29		4,189,186,576			4,407,205,221

Total equity				2,497,243,215,539			2,447,465,372,075

Total liabilities and equity				29,747,163,546,342			29,438,897,183,244

The accompanying notes are an integral part of these consolidated interim financial statements.

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Comprehensive Income

Three-Month Periods Ended March 31, 2017 and 2016


			Period Ended March 31
(In Korean won)	Note		2017 (Unaudited)		2016 (Unaudited)
			Three months		Three months

Operating revenue
Premium income		30		2,470,717,186,777		2,341,998,627,330
Reinsurance income		32		134,460,584,334		144,626,401,542
Gain from reimbursement		20		—		816,448,288
Recovered expenses		32,37		23,155,474,762		24,343,147,894
Interest income		6,33		167,965,151,094		159,694,187,769
Dividend income		6		19,729,296,554		18,057,228,363
Gain on valuation and disposal of securities		6,34		32,927,094,088		40,055,059,342
Gain on valuation and disposal of loans and other receivables		6,35		71,626,569		1,054,544
Gain on valuation and disposal of derivatives		6,13,36		331,083,244,096		79,284,161,278
Gain on valuation and disposal of Investments in subsidiaries				63,059,903		17,237,361
Foreign currency transaction gain		6		16,562,120,756		8,516,727,350
Other income		6,39		13,283,779,237		11,472,170,135
Separate account income		45		40,566,347,354		31,894,529,117

				3,250,584,965,524		2,860,776,980,313


Operating expenses
Change in insurance liabilities		22		446,486,426,286		512,198,164,335
Insurance claims paid		31		882,879,651,444		825,541,480,713
Refund of surrender value and dividend expenses		31		595,932,360,908		546,559,989,466
Reinsurance expenses		32		218,673,962,570		217,925,633,284
Loss from reimbursement		20		497,836,808		—
Claim survey expenses paid		38		55,704,098,860		53,859,648,604
Amortization of deferred acquisition costs		19		184,730,347,575		167,267,122,821
Insurance operating expenses		38		267,321,696,363		245,304,104,245
Interest expense		6,33		174,270,361		103,170,517
Loss on valuation and disposal of securities		6,34		8,816,803,406		19,488,168,763
Loss on valuation and disposal of loans and other receivables		6,35		4,822,885,496		7,710,266,046
Loss on valuation and disposal of derivatives		6,13,36		1,200,729,732		16,664,200,546
Loss on investments on subsidiaries and associates				155,495,886		332,891,164
Foreign currency transaction loss		6		352,685,651,868		71,764,798,546
Loss on changes of reinsurance assets		13		24,251,475,471		5,526,886,680
Administrative expenses for assets		38		13,968,012,503		14,662,533,666
Administrative expenses for real estate		15		4,665,039,850		5,293,028,148
Other expenses		6,39		19,916,080,154		21,523,226,213
Separate account expenses		45		40,566,347,354		31,894,529,117

				3,123,449,172,895		2,763,619,842,874


Operating income				127,135,792,629		97,157,137,439


Non-operating income (expense)
Non-operating income		40		4,482,401,312		745,672,663
Non-operating expenses		40		1,130,938,745		1,893,242,391

				3,351,462,567		(1,147,569,728	)


Profit before income tax from continuing operations				130,487,255,196		96,009,567,711


Income tax expense from continuing operations		41		30,504,243,405		23,082,779,676

Profit for the period from continuing operations				99,983,011,791		72,926,788,035

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Comprehensive Income

Three-Month Periods Ended March 31, 2017 and 2016


			Period Ended March 31
(In Korean won)	Note		2017 (Unaudited)			2016 (Unaudited)
			Three months			Three months

Profit for the period from discontinued operations				—			2,860,955,939
Profit for the period		29		99,983,011,791			75,787,743,974
Other comprehensive income (loss)		29		(10,305,168,327	)		125,177,672,544
Items that will not be reclassified subsequently to profit or loss
Remeasurements of defined benefit plans		26		(427,800,497	)		(404,369,274	)
Items that may be subsequently reclassified to profit or loss
Unrealized net change in fair value of available-for-sale financial assets		6		4,065,485,377			115,872,452,806
Effective portion of changes in fair value of cash flow hedges		6		702,488,615			265,630,398
Foreign currency translation differences for foreign operations				(16,481,172,267	)		(2,399,195,625	)
Other comprehensive income arising from separate account				1,835,830,445			11,843,154,239

				(10,305,168,327	)		125,177,672,544


Total comprehensive income for the period				89,677,843,464			200,965,416,518
Profit for the period attributable to :
Shareholders of the Parent Company				99,904,146,323			75,244,225,179
Non-controlling interests				78,865,468			543,518,795

				99,983,011,791			75,787,743,974

Total comprehensive income for the period attributable to :
Shareholders of the Parent Company				89,895,862,109			200,316,794,861
Non-controlling interests				(218,018,645	)		648,621,657

				89,677,843,464			200,965,416,518

Earnings per share
Basic earnings per share		42		1,502			1,254

The accompanying notes are an integral part of these consolidated interim financial statements.

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Changes in Equity

Three-Month periods ended March 31, 2017 and 2016


(In Korean won)	Capital stock		Capital surplus		Capital adjustments			Accumulated other comprehensive income			Accumulated other comprehensive income of assets held for sale		Accumulated other comprehensive income of disposal group		Retained earnings			Non-controlling interests			Total


Balance at January 1, 2016		30,000,000,000		181,120,621,932		(8,508,615	)		285,657,046,146			—		1,534,340,393		1,582,383,902,252			30,552,531,605			2,111,239,933,713
Total comprehensive income (loss)
Profit for the period		—		—		—			—			—		—		75,244,225,179			543,518,795			75,787,743,974
Net change in fair value of available-for-sale financial assets		—		—		—			115,852,633,013			—		—		—			19,819,793			115,872,452,806
Effective portion of changes in fair value of cash flow hedges		—		—		—			265,630,398			—		—		—			—			265,630,398
Foreign currency translation differences for foreign operations		—		—		—			(2,484,478,694	)		—		—		—			85,283,069			(2,399,195,625	)
Other comprehensive income arising from separate account		—		—		—			11,843,154,239			—		—		—			—			11,843,154,239
Remeasurements of defined benefit plans		—		—		—			(404,369,274	)		—		—		—			—			(404,369,274	)
Classified as held-for-sale		—		—		—			(95,357,868	)		—		95,357,868		—			—			—
Transactions with owners of the Group
Dividends to owners of the Group		—		—		—			—			—		—		(24,000,000,000	)		(512,133,600	)		(24,512,133,600	)

Balance at March 31, 2016 (Unaudited)		30,000,000,000		181,120,621,932		(8,508,615	)		410,634,257,960			—		1,629,698,261		1,633,628,127,431			30,689,019,662			2,287,693,216,631

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Changes in Equity

Three-Month periods ended March 31, 2017 and 2016


(In Korean won)	Capital stock		Capital surplus		Capital adjustments			Accumulated other comprehensive income			Accumulated other comprehensive income of assets held for sale			Accumulated other comprehensive income of disposal groups		Retained earnings			Non-controlling interests			Total


Balance at January 1, 2017		33,250,000,000		348,453,891,932		(8,508,615	)		201,183,492,288			314,081,671			—		1,859,865,209,578			4,407,205,221			2,447,465,372,075
Total comprehensive income (loss)
Profit for the period		—		—		—			—			—			—		99,904,146,323			78,865,468			99,983,011,791
Net change in fair value of available-for-sale financial assets		—		—		—			4,065,485,377			—			—		—			—			4,065,485,377
Effective portion of changes in fair value of cash flow hedges		—		—		—			702,488,615			—			—		—			—			702,488,615
Foreign currency translation differences for foreign operations		—		—		—			(16,184,288,154	)		—			—		—			(296,884,113	)		(16,481,172,267	)
Other comprehensive income arising from separate account		—		—		—			1,835,830,445			—			—		—			—			1,835,830,445
Remeasurements of defined benefit plans		—		—		—			(427,800,497	)		—			—		—			—			(427,800,497	)
Transactions with owners of the Group																				—
Dividends to owners of the Group		—		—		—			—			—			—		(39,900,000,000	)		—			(39,900,000,000	)
Others
Transfer of revaluation of property and equipment		—		—		—			—			(314,081,671	)		—		314,081,671			—			—

Balance at March 31, 2017 (Unaudited)		33,250,000,000		348,453,891,932		(8,508,615	)		191,175,208,074			—			—		1,920,183,437,572			4,189,186,576			2,497,243,215,539

The accompanying notes are an integral part of these consolidated interim financial statements.

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Cash Flows

Three-Month periods ended March 31, 2017 and 2016


	Three-month Period Ended March 31
(In Korean won)	2017 (Unaudited)			2016 (Unaudited)

	Three months			Three months

Cash flows from operating activities
Profit before income tax		130,487,255,196			99,409,863,739
Adjustments for:
Interest income		(167,965,151,094	)		(165,204,349,939	)
Interest expense		174,270,361			2,718,890,859
Dividend income		(19,729,296,554	)		(18,057,228,363	)
Change in reinsurance assets		24,251,475,471			5,526,886,680
Net loss (gain) from reimbursement		497,836,808			(816,448,288	)
Net gain on valuation and disposal of securities		(26,142,560,499	)		(22,474,045,143	)
Net loss on valuation of loans and other receivables		4,722,880,421			7,469,357,656
Net gain on valuation and disposal of derivatives		(328,093,021,519	)		(60,456,915,786	)
Net gain on Investments in subsidiaries		—			(246,922,766	)
Net foreign currency transaction loss		337,065,041,338			66,362,131,707
Change in insurance liabilities		446,486,426,286			512,198,164,335
Amortization of deferred acquisition costs		184,730,347,575			167,267,122,821
Depreciation		9,490,953,866			10,199,369,067
Amortization of intangible assets		2,173,616,170			2,470,909,567
Impairment loss (reversal of impairment loss) on intangible assets		58,220,808			(89,817,944	)
Net gain on disposal of assets held for sale		(3,781,139,548	)		—
Reversal of impairment loss on asset group held for sale		—			(1,269,606,163	)
Pension expenses		15,296,352,711			7,651,681,664
Other expenses		6,622,276,992			9,827,562,101

		485,858,529,593			622,486,605,804


Changes in:
Financial assets at fair value through profit or loss		151,983,663,075			(210,062,053,330	)
Joint compensation fund		—			(864,862,394	)
Derivative assets to hedge		1,030,531,086			(2,546,852,000	)
Loans		230,506,471,863			(120,339,244,435	)
Other receivables		(12,384,126,121	)		(726,837,692,421	)
Deferred acquisition costs		(170,847,358,132	)		(163,631,936,106	)
Other assets		(13,973,876,909	)		(7,623,106,661	)
Separate account assets		(250,284,646,134	)		(319,016,062,477	)
Financial liabilities at fair value through profit or loss		7,303,285,336			(102,078,661,590	)
Deposits		44,027,503			(13,680,874,606	)
Other financial liabilities		49,459,751,267			838,160,766,003
Provisions		(7,585,839,886	)		(10,149,280,030	)
Liability for defined benefit plans		(1,203,668,184	)		395,770,421
Other liabilities		(4,212,726,578	)		(2,774,084,672	)
Separate account liabilities		(121,692,530,422	)		49,122,946,554
Foreign currency translation differences for foreign operations		(28,493,675,088	)		(6,206,812,215	)

		(170,350,717,324	)		(798,132,039,959	)
Income tax paid		(25,093,188,587	)		(13,096,964,418	)
Interest received		163,829,064,073			166,993,160,331
Interest paid		(113,034,699	)		(2,665,417,453	)
Dividends received		15,535,941,965			8,467,018,580

Net cash inflow (outflow) from operating activities		663,690,988,513			(15,947,637,115	)

KB Insurance Co., Ltd and Subsidiaries

Consolidated Interim Statements of Cash Flows

Three-Month periods ended March 31, 2017 and 2016


	Three-month Period Ended March 31
(In Korean won)	2017 (Unaudited)			2016 (Unaudited)

	Three months			Three months

Cash flows from investing activities
Proceeds from sale of available-for-sale financial assets		818,154,051,608			570,457,744,883
Acquisitions of available-for-sale financial assets		(641,370,116,622	)		(866,283,950,713	)
Proceeds from redemption of held-to-maturity financial assets		86,500,000			—
Acquisitions of held-to-maturity financial assets		(1,097,592,054,647	)		(206,710,952,904	)
Proceeds from sale of property and equipment		787,577,157			759,716,767
Acquisitions of property and equipment		(3,247,709,635	)		(1,816,942,933	)
Proceeds from sale of intangible assets		1,138,500,000			1,700,180,799
Acquisitions of intangible assets		(4,308,392,044	)		(3,767,979,650	)
Proceeds from sale of non-current assets held for sale		7,829,493,000			—
Decrease in guarantee deposits		3,173,896,131			4,648,859,536
Increase in guarantee deposits		(1,720,845,116	)		(2,929,129,635	)
Cash inflows from hedging activities		35,376,824,880			392,672,074
Cash outflows from hedging activities		(5,403,204,729	)		(35,369,496,350	)

Net cash outflow from investing activities		(887,095,480,017	)		(538,919,278,126	)


Cash flows from financing activities
Dividends paid		—			(442,450,950	)
Increase in debts		—			136,697,159,455
Decrease in debts		—			(40,000,000,000	)
Increase in guarantee deposits from lessee		3,196,628,059			433,861,232
Decrease in guarantee deposits from lessee		(1,192,130,185	)		(1,754,842,560	)

Net cash inflow from financing activities		2,004,497,874			94,933,727,177


Effect of exchange rate fluctuations on cash and cash equivalents		(1,851,155,639	)		(163,225,469	)

Net decrease in cash and cash equivalents		(286,788,287,565	)		(460,096,413,533	)
Cash and cash equivalents at the beginning of the period		834,677,653,102			780,484,201,147

Cash and cash equivalents at the end of the period		547,889,365,537			320,387,787,614

Cash and cash equivalents classified as disposal groups		—			27,669,966,791

Cash and cash equivalents in the consolidated financial position at the end of the period		547,889,365,537			292,717,820,823

The accompanying notes are an integral part of these consolidated interim financial statements

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

1. The Parent Company

Overview of KB Insurance Co., Ltd and its subsidiaries (the “Group”) is as follows.

(1) Overview of the Parent Company

KB Insurance Co., Ltd (the “Parent Company”) was incorporated on January 27, 1959, under the laws of the Republic of Korea to engage in non-life insurance related business and asset management for the business as the Parent Company’s main business model. As of March 31, 2017, the Parent Company has 71 branch offices and 297 business offices. In June 1976, the Parent Company went public on the Korea Stock Exchange. The Parent Company’s major shareholder is KB Financial Group Inc. (39.81%) as of March 31, 2017.

(2) Overview of the consolidated subsidiaries

Details of ownership interests of the consolidated subsidiaries as of March 31, 2017 and December 31, 2016, are as follows:


Subsidiaries	Location	Industry	Date of financial statements		March 31, 2017						December 31, 2016
					Owner- ship			Ownership of non-controlling interests			Owner- ship			Ownership of non-controlling interests
Leading Insurance Services, Inc.	USA	Management service		Mar 31		100.00	%		—			100.00	%		—
LIG Insurance (China) Co., Ltd.	China	Non-life insurance		Mar 31		100.00	%		—			100.00	%		—
PT. KB Insurance Indonesia	Indonesia	Non-life insurance		Mar 31		70.00	%		30.00	%		70.00	%		30.00	%
KB Claims Survey & Adjusting	Korea	Claim service		Mar 31		100.00	%		—			100.00	%		—
KB Sonbo CNS	Korea	Management service		Mar 31		100.00	%		—			100.00	%		—
KB Golden Life Care Co., Ltd.	Korea	Service		Mar 31		100.00	%		—			100.00	%		—

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(3) Overview of the consolidated beneficiary certificates

Details of consolidated beneficiary certificates as of March 31, 2017 and December 31, 2016, are as follows:


Company	Location	Industry		Ownership interests
Company	Location	Industry		March 31, 2017			December 31, 2016
KB Hope Partner Private Fund Bond 1^st	Korea		Financial investment		100.00	%		100.00	%
Daishin Forte Alpha Private Fund 30^th	Korea		Financial investment		—			100.00	%
Daishin Forte Alpha Private Fund 31^st	Korea		Financial investment		—			100.00	%
Daishin Forte Alpha Private Fund 32^nd	Korea		Financial investment		—			100.00	%
Daishin Forte Alpha Private Fund 33^rd	Korea		Financial investment		—			100.00	%
Daishin Forte Alpha Private Fund 36^th	Korea		Financial investment		—			100.00	%
Daishin Forte Alpha Private Fund 43^rd	Korea		Financial investment		—			100.00	%
Daishin Forte Alpha Private Fund 44^th	Korea		Financial investment		—			100.00	%
Dongbu Private Fund 16^th	Korea		Financial investment		89.52	%		89.52	%
Mirae Asset Triumph Private Equity Investment Trust 38^th	Korea		Financial investment		100.00	%		100.00	%
Shinhan BNPP Private Fund 42^nd	Korea		Financial investment		100.00	%		100.00	%
Hana Landchip Realestate Private Fund 58^th	Korea		Financial investment		99.99	%		99.99	%
Hyundai Aviation Private Fund 3^rd	Korea		Financial investment		99.96	%		99.96	%
Hyundai Power Private Fund 3^rd	Korea		Financial investment		99.95	%		99.95	%
Hyundai Power Professional Investment Type Private Investment Fund No.4	Korea		Financial investment		99.77	%		99.77	%
KB U.S. LongShort Private Securities Fund 1	Korea		Financial investment		99.50	%		99.50	%
Hyundai Infra Professional Investment Type Private Investment Trust No.5	Korea		Financial investment		99.79	%		—

(4) Changes in subsidiaries


Company		Description
Daishin Forte Alpha Private Fund 30^th		Excluded from the consolidation due to disposal of investments
Daishin Forte Alpha Private Fund 31^st		Excluded from the consolidation due to disposal of investment
Daishin Forte Alpha Private Fund 32^nd		Excluded from the consolidation due to disposal of investments
Daishin Forte Alpha Private Fund 33^rd		Excluded from the consolidation due to disposal of investments
Daishin Forte Alpha Private Fund 36^th		Excluded from the consolidation due to disposal of investments
Daishin Forte Alpha Private Fund 43^rd		Excluded from the consolidation due to disposal of investment
Daishin Forte Alpha Private Fund 44^th		Excluded from the consolidation due to disposal of investment
Hyundai Infra Professional Investment Type Private Investment Trust No.5		Included in the consolidation due to gain of control through new investment

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(5) Summarized financial information of subsidiaries and beneficiary certificates

Summarized financial information of subsidiaries and beneficiary certificates as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017
(In millions of won)	Assets		Liabilities		Equity		Revenue		Profit for the period			Total comprehensi- ve income for the period
Company
Leading Insurance Services, Inc.		4,094		545		3,549		3,117		4			(290	)
LIG Insurance (China) Co., Ltd.		99,050		58,029		41,021		4,670		246			(2,525	)
PT. KB Insurance Indonesia		22,607		8,643		13,964		2,507		263			(727	)
KB Claims Survey & Adjusting		23,573		10,437		13,136		26,785		1,561			1,561
KB Sonbo CNS		3,734		3,117		617		8,563		49			49
KB Golden Life Care Co., Ltd.		19,204		108		19,096		79		(388	)		(388	)
KB HopePartner Private Fund 1^st		49,423		5		49,418		645		286			286
Dongbu Private Fund 16^th		38,847		22		38,825		480		384			384
Mirae Asset Triumph Private Equity Investment Trust 38^th		49,501		8		49,493		364		252			252
Shinhan BNPP Private Fund 42^nd		49,475		6		49,469		399		283			283
Hana Landchip Realestate Private Fund 58^th		15,162		1		15,161		1,129		(43	)		(43	)
Hyundai Aviation Private Fund 3^rd		18,115		1		18,114		1,883		203			203
Hyundai Power Private Fund 3^rd		22,230		140		22,090		317		(1,501	)		(1,501	)
Hyundai Power Professional Investment Type Private Investment Trust No.4		44,578		30		44,548		4,201		529			529
KB U.S. LongShort Private Securities Fund 1		20,895		6		20,889		2,136		573			573
Hyundai Infra Professional Investment Type Private Investment Trust No.5		48,298		16		48,282		4,149		451			451

		528,786		81,114		447,672		61,424		3,152			(903	)

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


	December 31, 2016
(In millions of won)	Assets		Liabilities		Equity		Revenue		Profit for the year			Total comprehensi- ve income for the year
Company
Leading Insurance Services, Inc.		4,425		585		3,840		14,272		(293	)		(180	)
LIG Insurance (China) Co., Ltd.		103,774		60,228		43,546		50,609		2,024			759
PT. KB Insurance Indonesia		25,858		11,168		14,690		16,110		1,358			2,105
KB Claims Survey & Adjusting		28,313		16,738		11,575		102,753		963			989
KB Sonbo CNS		4,285		3,717		568		33,357		306			306
KB Golden Life Care Co., Ltd.		19,533		49		19,484		12		(227	)		(227	)
KB HopePartner Private Fund 1st		49,137		5		49,132		2,494		700			700
Daishin Forte Alpha Private Fund 30^th		10,085		8		10,077		526		391			391
Daishin Forte Alpha Private Fund 31^st		20,239		13		20,226		1,083		766			766
Daishin Forte Alpha Private Fund 32^nd		10,043		6		10,037		578		397			397
Daishin Forte Alpha Private Fund 33^rd		10,042		6		10,036		561		393			393
Daishin Forte Alpha Private Fund 36^th		10,233		5		10,228		604		347			347
Daishin Forte Alpha Private Fund 43^rd		10,062		9		10,053		527		324			324
Daishin Forte Alpha Private Fund 44^th		10,039		3		10,036		581		326			326
Dongbu Private Fund 16^th		39,507		23		39,484		3,638		1,943			1,943
Mirae Asset Triumph Private Fund 38^th		49,243		2		49,241		2,315		881			881
Shinhan BNPP Private Fund 42^nd		49,187		—		49,187		1,782		766			766
Hana Landchip Realestate Private Fund 58^th		16,094		674		15,420		1,867		857			857
Hyundai Aviation Private Fund 3^rd		19,779		396		19,383		2,072		1,111			1,111
Hyundai Power Private Fund 3^rd		23,699		108		23,591		4,914		1,722			1,754
Hyundai Power Professional Investment Type Private Investment Trust No.4		44,035		15		44,020		4,854		359			359
KB U.S. LongShort Private Securities Fund 1		20,322		6		20,316		1,834		215			215

		577,934		93,764		484,170		247,343		15,629			15,282

(6) Details of non-controlling interests as of March 31, 2017, are as follows:


(In millions of won)	Profit (loss) for the period to non-controlling interests		Accumulated non-controlling interests
PT. KB Insurance Indonesia		79		4,189

		79		4,189

2. Significant Accounting Policies

(1) Basis of Preparation

The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with the International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Group’s financial position, financial performance or cash flows, is not presented in the accompanying consolidated interim financial statements.

The consolidated interim financial statements of the Group for the three-month period ended March 31, 2017, have been prepared in accordance with Korean IFRS 1034, Interim Financial Reporting. The consolidated interim financial statements have been prepared in accordance with the Korean IFRS which is effective or early adopted as of March 31, 2017.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) New and amended standards adopted by the Group

The Group newly applied the following amended standards for the annual period beginning on January 1, 2017, and this application does not have a material impact on the consolidated financial statements.

•

Amendments to Korean IFRS 1007, Statement of Cash Flows

Amendments to Korean IFRS 1007 Statement of Cash flows requires to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash flows.

•

Amendments to Korean IFRS 1012, Income Tax

Amendments to Korean IFRS 1012 clarify how to account for deferred tax assets related to debt instruments measured at fair value. Korean IFRS 1012 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issued clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice.

•

Amendments to Korean IFRS 1112, Disclosure of Interests in Other Entities

Amendments to Korean IFRS 1112 clarifies that the disclosure requirements in Korean IFRS 1112 apply to an entity’s interests in other entities when those interests are classified as held for sale or discontinued operations in accordance with Korean IFRS 1105 Non-current Assets Held for Sale or Discontinued Operations.

(3) New and amended standards not adopted by the Group

New standards and interpretations issued, but not effective for the financial year beginning January 1, 2017, and not early adopted by the Group are enumerated below

•

Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures

Amendments to Korean IFRS 1028 clarifies that a venture capital organization or a mutual fund, and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture. This amendment is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Since the Group is not a venture capital organization or a similar entity, the Group is not exempt from applying the equity method and thus the Group does not expect the amendments to have a significant impact on the consolidated financial statements.

•

Amendments to Korean IFRS 1102, Share-based Payment

Amendments to Korean IFRS 1102 clarifies accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. And also, clarifies that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. This amendment will be effective for annual periods beginning on or after January 1. 2018 with early adoption permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements.

•

Enactments of Korean IFRIC 2122, Foreign Currency Transactions and Advance Consideration

According to the enacted interpretation, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the prepayment or receipt of advance consideration. In case there are multiple payments or receipts in advance, the entity should determine a date of the transaction for each payment or receipt of advance consideration.

This enactments will be effective for annual periods beginning on or after January 1. 2018 with early adoption permitted. The Group does not expect the enactment to have a significant impact on the consolidated financial statements.

•

Korean IFRS 1109, Financial Instruments

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

The new standard for financial instruments issued on September 25, 2015 is effective for annual periods beginning on or after January 1, 2018 with early application permitted. This standard will replace Korean IFRS 1039 Financial Instruments: Recognition and Measurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018.

The standard requires retrospective application with some exceptions. For example, the entity is not required to restate prior periods in relation to classification, measurement and impairment of financial instruments. The standard requires prospective application of its hedge accounting requirements for all hedging relationships except the accounting for time value of options and other exceptions.

Korean IFRS 1109 Financial Instruments requires all financial assets to be classified and measured on the basis of the entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, an expected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss. Also, hedge accounting rules amended to extend the hedging relationship, which consists only of eligible hedging instruments and hedged items, qualifies for hedge accounting.

An effective implementation of Korean IFRS 1109 requires preparation processes including financial impact assessment, accounting policy establishment, accounting system development and the system stabilization. The impact on the Group’s financial statements due to the application of the standard is dependent on judgements made in applying the standard, financial instruments held by the Group and macroeconomic variables.

Within the Group, Korean IFRS 1109 Task Force Team (‘TFT’) has been set up to prepare for implementation of Korean IFRS 1109 since October, 2015. The Group has been implementing Korean IFRS 1109 through three stages as shown in the following table: Stage 1 (effect analysis), Stage 2 (design and implementation), and Stage 3 (preparation of application). The Group is analyzing the financial impacts of Korean IFRS 1109 on its financial statements.


Stage	Period	Process

1	From Oct. to Dec. 2015 (for 3 months)	Analysis of GAAP differences and development of methodology

2	From Jan. to Dec. 2016 (for 12 months)	Development of methodology, definition of business requirement, and the system development

3	From Jan. 2017 to Mar. 2018 (for 15 months)	System test and preparation for opening balances of the financial statements

The following areas are likely to be affected in general.

(a) Classification and Measurement of Financial Assets

When implementing Korean IFRS 1109, the classification of financial assets will be driven by the Group’s business model for managing the financial assets and contractual terms of cash flow. The following table shows the classification of financial assets measured subsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. If a hybrid contract contains a host that is a financial asset, the classification of the hybrid contract shall be determined for the entire contract without separating the embedded derivative.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


Business model	Contractual cash flows characteristics
Business model
	Solely represent payments of principal and interest	All other
Hold the financial asset for the collection of the contractual cash flows	Measured at amortized cost¹	Recognized at fair value through profit or loss²
Hold the financial asset for the collection of the contractual cash flows and trading	Measured at fair value through other comprehensive income¹
Hold for trading and others	Measured at fair value through profit or loss

¹	A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch (irrevocable).

²	A designation at fair value through other comprehensive income is allowed only if the financial instrument is the equity investment that is not held for trading (irrevocable).

With the implementation of Korean IFRS 1109, the criteria to classify the financial assets at amortized cost or at fair value through other comprehensive income are more strictly applied than the criteria applied with Korean IFRS 1039. Accordingly, the financial assets at fair value through profit or loss may increase by implementing Korean IFRS 1109 and may result an extended fluctuation in profit or loss.

(b) Classification and Measurement of Financial Liabilities

Korean IFRS 1109 requires the amount of the change in the liability’s fair value attributable to changes in the credit risk to be recognized in other comprehensive income, unless this treatment of the credit risk component creates or enlarges a measurement mismatch. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss.

Under Korean IFRS 1039, all financial liabilities designated at fair value through profit or loss recognized their fair value movements in profit or loss. However, under Korean IFRS 1109, certain fair value movements will be recognized in other comprehensive income and as a result, profit or loss from fair value movements may decrease.

Korean IFRS 1109 sets out a new forward looking ‘expected credit loss impairment model’ which replaces the incurred loss model under Korean IFRS 1039 that impaired asset if there is objective evidence and applies to:

•

Financial assets measured at amortized cost,

•

Debt investments measured at fair value through other comprehensive income, and

•

Certain loan commitments and financial guaranteed contracts.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

Under Korean IFRS 1109, a credit event (or impairment ‘trigger’) no longer has to occur before credit losses are recognized. The Group will always recognize (at a minimum) 12-month expected credit losses in profit or loss. Lifetime expected losses will be recognized on assets for which there is a significant increase in credit risk after initial recognition.


	Stage	Loss allowance

1	No significant increase in credit risk after initial recognition¹	12-month expected credit losses: expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date

2	Significant increase in credit risk after initial recognition	Lifetime expected credit losses: expected credit losses that result from all possible default events over the life of the financial instrument
3	Objective evidence of impairment

¹	If the financial instrument has low credit risk at the end of the reporting period, the Group may assume that the credit risk has not increased significantly since initial recognition.

Under Korean IFRS 1109, the asset that is credit-impaired at initial recognition would recognize all changes in lifetime expected losses since the initial recognition as a loss allowance with any changes recognized in profit or loss.

(d) Hedge Accounting

Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in a foreign operations) required by Korean IFRS 1039 remains unchanged in Korean IFRS 1109, however, the new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. Korean IFRS 1109 allows more hedging instruments and hedged items to qualify for hedge accounting, and relaxes the hedge accounting requirement by removing two hedge effectiveness tests that are a prospective test to ensure that the hedging relationship is expected to be highly effective and a quantitative retrospective test (within range of 80-125%) to ensure that the hedging relationship has been highly effective throughout the reporting period.

With implementation of Korean IFRS 1109, volatility in profit or loss may be reduced as some items that were not eligible as hedged items or hedging instruments under Korean IFRS 1039 are now eligible under Korean IFRS 1109.

•

Korean IFRS 1115, Revenue from Contracts with Customers

Korean IFRS 1115 Revenue from Contracts with Customers issued on November 6, 2015 replaces Korean IFRS 1018 Revenue, Korean IFRS 1011 Construction Contracts, Interpretation 2031 Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113 Customer Loyalty Programs, Interpretation 2115 Agreements for the Construction of Real Estate and Interpretation 2118 Transfers of assets from customers.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

Korean IFRS 1018 and other, the current standard, provide revenue recognition criteria by type of transactions; such as, sales goods, the rendering of services, interest income, royalty income, dividend income, and construction contracts. However, Korean IFRS 1115, the new standard, is based on the principle that revenue is recognized when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. A new five-step process must be applied before revenue from contract with customer can be recognized:

•

Identify contracts with customers

•

Identify the separate performance obligation

•

Determine the transaction price of the contract

•

Allocate the transaction price to each of the separate performance obligations, and

•

Recognize the revenue as each performance obligation is satisfied.

This enactment is effective for annual periods beginning on or after January 1. 2018, with early adoption permitted. The Group is analyzing financial impacts of Korean IFRS 1115 on its consolidated financial statements.

(4) Accounting policies

The significant accounting policies and calculation methods applied in the preparation of these consolidated interim financial statements have been consistently applied to all periods presented, except for the impact of changes due to enactment of new standards, amendments and interpretations disclosed in Note 2.1. and the following paragraph.

(a) Income tax expenses for the interim period

Income tax expense for the interim period is measured by expected average annual income tax rate applicable on expected total annual income.

3. Significant Accounting Estimates and Assumptions

The Group assumes and estimates about its future events. Assumptions and estimates are assessed regularly given the future events reasonably foreseen by past experience and current situation. The estimates may be different from actual results.

The significant accounting estimates and assumptions applied in the preparation of these consolidated interim financial statements have been consistently applied to all periods presented, except for the estimates in measuring income tax expenses.

4. Financial risk management

The financial risks that the Group is exposed to are market risk (currency exchange risk, interest risk of fair value, interest risk of cash flow, price risk), credit risk, liquidity risk and others.

As consolidated interim financial statements do not include all the disclosures of financial risk management required at consolidated annual financial statements, please refer to consolidated financial statements as of December 31, 2016.

There has been no material change in risk management department and risk management policy of the Group after December 31, 2016

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

5. Measurement of fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best estimate of the fair value of financial instruments is the quoted price in the active market. The Group believes that the fair value and its measurement method of financial instruments is appropriate and reasonable, however, it may be changed under another measurement method or assumption. As various methods have been adopted to calculate fair value of financial instruments and a number of assumptions have been made, it is hard to reasonably compare the fair values of financial instruments measured by different financial institutions.

(1) Financial instruments measured at amortized costs

(a) The method of measuring fair value of financial instruments measured at amortized cost is as follows:


Accounts		Methodology

Cash and cash equivalents		The difference between carrying amount and fair value of cash and cash equivalents is not significant, so carrying amount is recognized as the fair value.

Loans and other receivables		Fair value of loans is measured by the present value of the amount expected to receive. Expected cash flow is discounted using the interest rate considering current market interest rate and credit spread.

Held-to-maturity financial assets		The average price provided by the KIS bond valuation Inc. and NICE P&I Inc. is used as the fair value.

Other financial liabilities		The difference between carrying value and fair value of other financial liabilities is not significant so the carrying value is recognized as the fair value.

(b) The carrying value and the fair value of financial instruments measured at amortized cost as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017				December 31, 2016
(In millions of won)	Carrying value		Fair value		Carrying value		Fair value
Financial assets
Cash and cash equivalents		547,889		547,889		834,678		834,678
Held-to-maturity financial assets		4,621,482		4,616,379		3,546,091		3,641,640
Loans		6,591,408		6,604,530		6,828,087		6,849,850
Other receivables		767,226		767,458		733,382		732,892

		12,528,005		12,536,256		11,942,238		12,059,060

Financial liabilities
Other financial liabilities		625,848		625,382		531,271		531,271

(2) Financial instruments measured at the fair value

The Group classifies and discloses fair value of the financial instruments into the following three-level hierarchy:

(i) Level 1: Financial instruments measured at quoted prices in active markets for identical instruments are classified as level 1.

(ii) Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.

(iii) Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(a) As of March 31, 2017 and December 31, 2016, the level of the fair value hierarchy within which the fair value measurement was categorized as follows:


	March 31, 2017
(In millions of won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Trading assets		25,247		502,256		524		528,027
Financial assets designated at fair value through profit or loss		—		43,261		524,380		567,641

		25,247		545,517		524,904		1,095,668

Available-for-sale financial assets¹		474,868		6,542,968		2,162,826		9,180,662
Hedging derivative assets		—		138,708		—		138,708

		500,115		7,227,193		2,687,730		10,415,038

Financial liabilities
Financial liabilities designated at fair value through profit or loss		—		—		1		1
Hedging derivative liabilities		—		5,865		—		5,865

		—		5,865		1		5,866

¹	Available-for-sale financial assets that are measured at acquisition cost due to the inability to measure the reliable fair value are excluded.


	December 31, 2016
(In millions of won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Trading assets		245,268		404,337		317		649,922
Financial assets designated at fair value through profit or loss		—		43,114		597,823		640,937

		245,268		447,451		598,140		1,290,859

Available-for-sale financial assets¹		631,006		6,835,131		2,137,296		9,603,433
Hedging derivative assets		—		6,145		—		6,145

		876,274		7,288,727		2,735,436		10,900,437

Financial liabilities
Financial liabilities designated at fair value through profit or loss		1,068		8,320		3		9,391
Hedging derivative liabilities		—		147,320		—		147,320

		1,068		155,640		3		156,711

¹	Available-for-sale financial assets that are measured at acquisition cost due to the inability to measure the reliable fair value are excluded.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(b) The fair value hierarchy of financial instruments which are not measured at fair value but disclosed in the financial statements as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017
	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents		—		547,889		—		547,889
Held to maturity financial assets		2,673,394		1,940,806		2,179		4,616,379
Loans		—		308,808		6,295,722		6,604,530
Other receivables		—		46,215		721,243		767,458

		2,673,394		2,843,718		7,019,144		12,536,256

Financial liabilities
Other financial liabilities		—		—		625,382		625,382

(In millions of won)	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents		—		834,678		—		834,678
Held to maturity financial assets		2,369,929		1,269,286		2,425		3,641,640
Loans		—		331,492		6,518,358		6,849,850
Other receivables		—		50,266		682,626		732,892

		2,369,929		2,485,722		7,203,409		12,059,060

Financial liabilities
Other financial liabilities		—		—		531,271		531,271

(3) Financial instruments that are measured at acquisition cost due to inability to measure the reliable fair value as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of Korean won)	March 31, 2017		December 31, 2016
Available-for-sale financial assets		5,400		5,421

(4) There was no transfer between level 1 and level 2 for the three-month period ended March 31, 2017 and 2016.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(5) Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017
	Fair value		Valuation techniques	Inputs
Financial assets
Trading assets		502,256	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Financial assets designated at fair value through profit or loss		43,261	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Available-for-sale financial assets¹		6,542,968	Discounted cash flow, option pricing model, net asset value	Price of underlying assets, discount rate, volatility
Hedging derivatives		138,708	Discounted cash flow	Discount rate, foreign exchange rate

		7,227,193

Financial liabilities
Hedging derivatives		5,865	Discounted cash flow	Discount rate, foreign exchange rate

		5,865

¹	Valuation inputs to measure the fair values of beneficiary certificates are not disclosed as they are based on prices quoted by asset management companies.


(In millions of won)	December 31, 2016
	Fair value		Valuation techniques	Inputs
Financial assets
Trading assets		404,337	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Financial assets designated at fair value through profit or loss		43,114	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Available-for-sale financial assets¹		6,835,131	Discounted cash flow, option pricing model, net asset value	Discount rate
Hedging derivatives		6,145	Discounted cash flow	Discount rate, foreign exchange rate

		7,288,727

Financial liabilities
Financial liabilities designated at fair value through profit or loss		8,320	Discounted cash flow	Discount rate, foreign exchange rate
Hedging derivatives		147,320	Discounted cash flow	Discount rate, foreign exchange rate

		155,640

¹	Valuation inputs to measure the fair values of beneficiary certificates are not disclosed as they are based on prices quoted by asset management companies

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(6) Disclosure about financial instruments classified as level 3

(a) Changes in level 3 of the fair value hierarchy for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Trading assets		Financial assets designated at fair value through profit or loss			Available-for- sale financial assets			Financial liabilities at fair value through profit or loss
Beginning balance		317		597,823			2,137,296			3
Total income (loss)
Profit or loss		207		(25,629	)		(16,456	)		(2	)
Other comprehensive income		—		—			1,328			—
Purchase		—		22,660			254,969			—
Settlement		—		(70,474	)		(37,471	)		—
Transfers out of level 3 ¹		—		—			(176,840	)		—

		524		524,380			2,162,826			1

¹	Amounts transferred out of level 3 due to the changes in valuation methods used for measuring beneficiary certificates’ asset portfolio


	2016
(In millions of won)	Trading assets		Financial assets designated at fair value through profit or loss			Available-for- sale financial assets			Financial liabilities at fair value through profit or loss
Beginning balance		30,074		519,090			1,575,533			1,431
Total income (loss)
Profit or loss		186		(1,261	)		(5,706	)		(1,253	)
Other comprehensive income		—		—			1,505			—
Purchase		—		59,310			143,253			—
Settlement		—		—			(36,010	)		—

		30,260		577,139			1,678,575			178

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(b) Unobservable inputs

Information about significant unobservable inputs in measuring financial instruments categorized as level 3 as of March 31, 2017 and December 31, 2016, are as follows:

March 31, 2017

(In millions of won)

Fair

value

Valuation

techniques

Significant

unobservable

input

Range of

estimates for

unobservable

input (%)

Fair value measurement

sensitivity to unobservable

input

Financial assets

Trading assets

524

Discounted cash flow, option pricing model

The volatility of the
underlying asset

26.44

A significant increase in volatility would result in a greater change in fair value

Correlations

16.54

A significant increase in correlations would result in a greater change in fair value

Financial assets designated at fair value through profit or loss

524,380

Discounted cash flow, option pricing model

The volatility of the
underlying asset

26.44~37.35

A significant increase in volatility would result in a greater change in fair value

Correlations

16.54~90

A significant increase in correlations would result in a greater change in fair value

Recovery rate

A significant increase in recovery rate would result in a higher fair value.

Available-for-sale financial assets¹

2,162,826

Discounted cash flow, option pricing model, net asset method

Discount rate

6.76~14.39

A significant increase in discount rate would result in a lower fair value.

Growth rate

0.00~6.5

A significant increase in growth rate would result in a higher fair value

The volatility of the
underlying asset

22.41~37.35

A significant increase in volatility would result in a greater change in fair value

Correlations

82.00~82.26

A significant increase in correlations would result in a greater change in fair value

2,687,730

Financial liabilities

Financial liabilities at fair value through profit or loss

Option pricing model

The volatility of the
underlying asset

24.3~24.7

A significant increase in volatility would result in a greater change in fair value

¹	Valuation inputs to measure the fair values of beneficiary certificates are not disclosed as they are based on prices quoted by asset management companies.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

December 31, 2016

(In millions of won)

Fair

value

Valuation

techniques

Significant

unobservable

input

Range of

estimates for

unobservable

input (%)

Fair value measurement

sensitivity to unobservable

input

Financial assets

Trading assets

317

Discounted cash flow, option pricing model

The volatility of the
underlying asset

31.579

A significant increase in volatility would result in a greater change in fair value.

Correlations

8.6

A significant increase in correlations would result in a greater change in fair value.

Financial assets designated at fair value through profit or loss

597,823

Discounted cash flow, option pricing model

The volatility of the
underlying asset

5.84~40.8

A significant increase in volatility would result in a greater change in fair value.

Correlations

8.6~90.00

A significant increase in correlations would result in a greater change in fair value.

Recovery rate

A significant increase in recovery rate would result in a higher fair value.

Available-for-sale financial assets¹

2,137,296

Discounted cash flow, option pricing model, net asset method

Discount rate

6.76~14.39

A significant increase in discount rate would result in a lower fair value.

Growth rate

0.00~6.5

A significant increase in growth rate would result in a higher fair value

The volatility of the
underlying asset

23.82~40.8

A significant increase in volatility would result in a greater change in fair value.

Correlations

85.24~89.38

A significant increase in correlations would result in a greater change in fair value.

2,735,436

Financial liabilities

Financial liabilities at fair value through profit or loss

Option pricing model

The volatility of the
underlying asset

27~37.95

A significant increase in volatility would result in a greater change in fair value.

¹	Valuation inputs to measure the fair values of beneficiary certificates are not disclosed as they are based on prices quoted by asset management companies.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

Sensitive analysis of changes in unobservable inputs as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017
	Favorable change				Unfavorable change
(In millions of won)	Profit or loss		Other comprehensive income		Profit or loss			Other comprehensive income
Financial Assets
Financial assets at fair value through profit or loss¹		2,271		—		(1,753	)		—
Available-for-sale financial assets²		—		3,080		—			(2,470	)

		2,271		3,080		(1,753	)		(2,470	)

¹	Based on increase or decrease in volatility of underlying assets (1%), correlation (1% or 10%) or recovery rate (1%)

²	Based on increase or decrease in discount rate (1%), growth rate (10%), correlation (10%), or volatility of underlying assets (1%).


	December 31, 2016
	Favorable change				Unfavorable change
(In millions of won)	Profit or loss		Other comprehensive income		Profit or loss			Other comprehensive income
Financial Assets
Financial assets at fair value through profit or loss¹		2,408		—		(2,357	)		—
Available-for-sale financial assets²		—		3,078		—			(2,644	)

		2,408		3,078		(2,357	)		(2,644	)

¹	Based on increase or decrease in volatility of underlying assets (1%), correlation (1% or 10%) or recovery rate (1%)

²	Based on increase or decrease in discount rate (1%), growth rate (10%), correlation (10%), or volatility of underlying assets (1%).

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(7) Offsetting financial assets and financial liabilities

Details of financial assets and financial liabilities subject to offsetting, enforceable master netting agreements and similar agreements as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017
	Financial		Offsetting financial		Financial assets and		Amount not offsetting in the statements of financial position
(In millions of won)	assets and liabilities recognized		assets and liabilities recognized		liabilities recognized after offset		Financial instruments			Cash collateral received		Net amounts
Financial assets
Financial assets at fair value through profit or loss		13,675		—		13,675		—			—		13,675
Hedging derivative		138,708		—		138,708		(5,865	)		—		132,843

		152,383		—		152,383		(5,865	)		—		146,518

Financial liabilities
Hedging derivative		5,865		—		5,865		(5,865	)		—		—

		5,865		—		5,865		(5,865	)		—		—


	December 31, 2016
	Financial		Offsetting financial		Financial assets and		Amount not offsetting in the statements of financial position
(In millions of won)	assets and liabilities recognized		assets and liabilities recognized		liabilities recognized after offset		Financial instruments			Cash collateral received		Net amounts
Financial assets
Financial assets at fair value through profit or loss		56		—		56		(56	)		—		—
Hedging derivatives		6,145		—		6,145		(6,145	)		—		—

		6,201		—		6,201		(6,201	)		—		—

Financial liabilities
Financial liabilities at fair value through profit or loss		8,320		—		8,320		(56	)		—		8,264
Hedging derivatives		147,320		—		147,320		(6,145	)		—		141,175

		155,640		—		155,640		(6,201	)		—		149,439

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

6. Profit or loss and other comprehensive income of financial instruments

Profit or loss and other comprehensive income of financial instruments by categories for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
	Profit or loss
(In millions of won)	Interest income (expense)			Dividend income		Gain (loss) on disposal			Gain (loss) on valuation		Impairment loss			Foreign currency transaction gain (loss)			Fees and commissi- on income (expense)			Total			Other comprehe- nsive income
Cash and cash equivalents	W	674			—		—			—		—			(1,852	)		—			(1,178	)		—

Trading assets		2,909			—		5,373			21,816		—			(3,067	)		—			27,031			—

Financial assets designated at fair value through profit or loss		7,516			—		(3,111	)		1,991		—			(24,831	)		(572	)		(19,007	)		—
Available-for-sale financial assets		57,183			19,729		25,423			—		(1,596	)		(276,845	)		114			(175,992	)		4,065
Held-to-maturity financial assets		28,322			—		—			—		—			(25,230	)		—			3,092			—

Hedging derivatives		—			—		44,487			259,609		—			—			—			304,095			702

Loans and other receivables		71,361			—		—			—		(4,751	)		(4,299	)		894			63,205			—

Financial liabilities		(174	)		—		—			—		—			—			—			(174	)		—

		167,791			19,729		72,172			283,416		(6,347	)		(336,124	)		436			201,073			4,767


	2016¹
	Profit or loss
(In millions of won)	Interest income (expense)			Dividend income		Gain (loss) on disposal			Gain (loss) on valuation		Impairment loss			Foreign currency transaction gain (loss)			Fees and commissi- on income (expense )			Total			Other comprehe- nsive income
Cash and cash equivalents	W	914			—		—			—		—			(165	)		—			749			—

Trading assets		1,866			34		662			9,528		—			(1,602	)		—			10,488			—

Financial assets designated at fair value through profit or loss		3,883			—		—			5,083		—			(4,270	)		(630	)		4,066			—
Available-for-sale financial assets		59,728			18,023		22,885			—		(9,879	)		(55,209	)		99			35,647			115,872
Held-to-maturity financial assets		18,412			—		—			—		—			(762	)		—			17,650			—

Hedging derivatives		—			—		(13,123	)		68,030		—			—			—			54,907			266

Loans and other receivables		74,891			—		—			—		(7,710	)		222			639			68,042			—
Financial liabilities measured at amortized cost		(103	)		—		—			—		—			796			—			693			—

	W	159,591			18,057		10,424			82,641		(17,589	)		(60,990	)		108			192,242			116,138

¹	Amounts after reclassifying profit of LIG Investment & Securities Co., Ltd., which is classified as disposal group held for sale, to profit for the year from discontinued operations.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

7. Cash and cash equivalents

Cash and cash equivalents as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Cash		8		8
Checking account		897		975
Demand deposits		53,066		44,320
Deposit money		11,032		11,000
Deposits in foreign currency		72,697		60,916
Others		410,189		717,459

		547,889		834,678

8. Financial assets at fair value through profit or loss

(1) Trading assets

Trading assets as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Equity securities¹
Stocks		497		2,033
Debt securities²
Government and public bonds		96,508		237,826
Bank debenture		19,982		—
Special bonds		30,007		31,979
Beneficiary certificates³
Debt type		24		15,029
Others		200,088		240,138
Securities in foreign currency^{2 3}
Stocks		228		214
Debt securities		130,529		86,450
Beneficiary certificates		34,183		34,765
Trading derivatives⁵		15,981		1,489

		649,923		649,923

¹	Fair values of listed securities are closing prices in the stock market at the end of reporting period.

²	Fair values of debt securities are the average of valuation prices provided by the KIS bond valuation Inc. and NICE P&I Inc.

³	Fair values of beneficiary certificates are based on prices quoted by asset management companies

⁴	Fair values of other financial instruments are the average of valuation prices provided by the KIS bond valuation Inc. and NICE P&I Inc.

⁵	Fair values of trading derivatives are the average of valuation prices provided by the KIS bond valuation Inc. and NICE P&I Inc.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) Financial assets designated at fair value through profit or loss

Financial assets designated at fair value through profit or loss as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Securities in foreign currency¹
Hybrid securities		252,899		249,159
Others		57,530		61,679
Other securities¹
Equity Linked Bonds (ELB)		—		20,455
Derivative Linked Securities (DLS)		149,463		179,108
Derivative Linked Bonds (DLB)		43,262		66,031
Others		64,487		64,505

		567,641		640,937

¹	Fair values of securities of foreign currencies and other securities are the average of valuation prices provided by the KIS bond valuation Inc. and NICE P&I Inc.

Financial assets above are the hybrid financial instrument that includes one or more embedded derivatives. The Group designates the entire instrument at fair value through profit or loss.

9. Available-for-sale financial assets

Available-for-sale financial assets as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Equity securities¹
Listed equity securities		77,432		67,598
Unlisted equity securities		75,974		75,805
Investments in partnerships		182,075		188,126

		335,481		331,529

Debt securities²
Government and public bonds		261,273		413,370
Special bonds		1,097,219		1,219,082
Bank debenture		622,788		649,067
Corporate bonds		1,304,119		1,361,001

		3,285,399		3,642,520

Beneficiary certificates³
Debt type		50,578		50,387
Stock type		96,203		149,800
Mixed type		59,161		53,976
Others		1,586,561		1,379,422

		1,792,503		1,633,585

Securities in foreign currency⁴
Stock		—		3,731
Investments in partnerships		83,796		89,104
Debt securities		2,560,375		2,927,219
Others		891,327		803,486

		3,535,498		3,823,540

Other securities⁵
Others		237,181		177,680

		9,186,062		9,608,854

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

Fair values of listed securities are quoted closing prices of the stock market at the end of reporting period. Except for those that are unable to reliably measure the fair values and therefore are assessed at their acquisition costs, the fair values of unlisted securities and investments are determined based on the Korea Asset Pricing, KIS bond valuation Inc. or NICE P&I Inc.

²	Available-for-sales debt securities’ fair values are the average of valuation prices provided by the KIS bond valuation Inc. and NICE P&I Inc.

³	Fair values of beneficiary certificates are based on prices quoted by asset management companies or valuation prices of independent valuation companies.

⁴

Fair values of investments in partnerships are measured by net asset value. Debt securities’ fair value is the average of valuation prices provided by the KIS bond valuation Inc. and NICE P&I Inc. Debt securities owned by the U.S branch is the posted price or valuation price by independent valuation companies.

⁵	Fair values of other securities are measured based on posted prices, valuation prices by independent valuation companies or based on prices quoted by asset management companies.

10. Held-to-maturity financial assets

Held-to-maturity financial assets as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Debt securities
Government and public bonds		2,662,961		2,292,686
Special bonds		1,309,598		1,009,656
Bank debenture		59,334		59,312
Corporate bonds		40,000		40,000
Securities in foreign currency
Bank debenture		549,589		144,437

		4,621,482		3,546,091

11. Loans and other receivables

(1) Loans and other receivables as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017			December 31, 2016
Loans
Call loans		410			340
Policy loans		1,802,296			1,753,196
Loans secured by real estate		2,371,222			2,479,737
Unsecured loans		259,956			271,155
Loans secured by third party guarantees		26,567			27,371
Other loans		2,178,331			2,341,834
Deferred loan origination fees and costs		12,532			13,289
Allowance for credit loss		(59,906	)		(58,835	)

		6,591,408			6,828,087

Other receivables
Due from banks		114,049			138,300
Insurance accounts receivables		306,133			309,581
Accounts receivables		159,401			87,712
Accrued revenue		116,108			123,306
Notes receivables		159			285
Guarantee deposits		86,713			88,911
Deposits in court		7,397			6,977
Present value discount		(1,441	)		(1,515	)
Allowance for credit loss		(21,293	)		(20,175	)

		767,226			733,382

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) Due from banks as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Deposit money		30,689		32,599
Derivatives margin account		444		18,985
Specific deposits		64		64
Due from banks		82,852		86,652

		114,049		138,300

(3) Restricted due from banks as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016		Descriptions
Derivatives margin account		444		18,985	Exchange traded derivatives margin account
Specific deposits		64		64	Deposits for the opening checking accounts

Time deposits in foreign currency and others		8,155		8,708	Deposits for operation and others

		8,663		27,757

(4) Insurance accounts receivables as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Insurance receivable		62,169		55,995
Due from agents		6,049		7,113
Co-insurance receivable		15,517		15,506
Receivables related to agency business		20,667		17,996
Reinsurance accounts receivable		94,385		106,732
Overseas reinsurance premiums receivable		105,835		104,753
Deposits on reinsurance treaty ceded		1,511		1,486

		306,133		309,581

(5) Changes in allowance of credit loss of the loans and other receivables for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017								2016
(In millions of won)	Loans			Other Receivables		Total			Loans			Other Receivables		Total
Beginning balance	W	58,835			20,175		79,010			31,156			17,439		48,595
Increase
Impairment loss		3,518			1,305		4,823			7,439			271		7,710
Recoveries from written-off loans		289			—		289			214			—		214
Decrease
Reversal		—			72		72			—			1		1
Written-offs		3,008			115		3,123			1,235			69		1,304
Others		(272	)		—		(272	)		(302	)		—		(302	)

Ending balance	W	59,906			21,293		81,199			37,876			17,640		55,516

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(6) Changes in deferred loan origination fees and costs for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017			2016
Beginning balance		13,289			17,306
Increase		(227	)		2,501
Decrease		(530	)		(2,481	)

Ending balance		12,532			17,326

12. Derivatives

(1) The notional amounts of derivatives as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Trading
Currency forwards		270,751		338,811
Currency swaps		44,644		48,340
Other		6,593		6,593

		321,988		393,744

Fair value hedge
Currency forwards		2,386,950		2,770,043

		2,386,950		2,770,043

Cash flow hedge
Currency swaps		1,444,612		891,937
Interest rate swaps		58,595		63,446

		1,503,207		955,383

(2) Fair value of derivative instruments as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017				December 31, 2016
(In millions of won)	Assets		Liabilities		Assets			Liabilities
Trading
Currency forwards		12,602		—		1,172			8,436
Currency swaps		2,855		—		—			952
Other		524		1		317			3

		15,981		1		1,489			9,391

Hedge
Currency forwards		91,265		3,329		6,135			92,335
Currency swaps		47,439		2,079		(55	)		54,557
Interest rate swaps		4		457		65			428

		138,708		5,865		6,145			147,320

		154,689		5,866		7,634			156,711

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(3) Gains and losses on valuation of derivatives for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017					2016
(In millions of won)	Gain			Loss		Gain			Loss
Profit or loss
Currency forwards		179,788			169		71,602			134
Currency swaps		101,322			76		2,221			—
Stock related		—			—		668			284
Interest related		16			—		37			25
Other		207			—		1,258			—
Credit risk adjustment		5			82		11			46

		281,338			327		75,797			489

Accumulated other comprehensive income
Currency swaps		2,078			1,307		(323	)		177
Interest related		(47	)		22		766			—

		2,031			1,329		443			177

		283,369			1,656		76,240			666

(4) Hedge accounting

(a) At the end of reporting period, in order to mitigate the risk of change in fair value and risk of change in cash flows of foreign currency bonds caused by changes in exchange rate and interest rate, the Group entered into a currency forward and currency swap contract.

(b) Fair value hedge

Details of valuation gains or losses in fair value hedge accounting for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017				2016
(In millions of won)	Gain		Loss		Gain		Loss
Hedging instrument
Currency forwards		162,411		169		65,973		134
Currency swaps		—		—		333		—

		162,411		169		66,306		134

Hedged item
Financial assets at fair value through profit or loss		21		583		—		2,588
Available-for-sale financial assets		137		159,995		134		62,676
Held-to-maturity financial assets		—		—		—		709
Loans		—		—		—		333
Others receivables		11		1,834		—		—

		169		162,412		134		66,306

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

①	Details of expected cash flow of cash flow hedge accounting as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017
(In millions of won)	1 month or less		3 months or less		1 year or less		5 years or less			Total
Cash flow of derivatives settled in net amounts		60		32		120		(701	)		(489	)
Cash inflow of derivatives settled in gross amounts		5,088		56,004		782,400		807,190			1,650,682
Cash outflow of derivatives settled in gross amounts		5,446		54,659		770,958		783,823			1,614,886

	December 31, 2016
(In millions of won)	1 month or less		3 months or less		1 year or less		5 years or less			Total
Cash flow of derivatives settled in net amounts		76		44		421		(746	)		(401	)
Cash inflow of derivatives settled in gross amounts		2,209		5,345		453,229		462,835			923,618
Cash outflow of derivatives settled in gross amounts		2,472		5,9317		486,277		488,957			983,637

②

Regarding cash flow hedges, the expected maximum period exposed to risk of change in cash flow is up to July 15, 2021. The expected amount of profit or loss on valuation of derivative instruments that will be reclassified from accumulated other comprehensive income to profit or loss within one year upon maturity are W3,343 million in profit and W1,473 million in loss.

(d) The amounts reclassified from equity to profit or loss and the ineffective portion of the gain or loss on the hedging instrument recognized in profit or loss for the three-month periods ended March 31, 2017 and 2016, are as follows:

2017

2016

(In millions of won)

Realized

Ineffective

Realized

Ineffective

Currency swaps

92,683

4,663

2,302

)

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

13. Reinsurance assets

Changes in reinsurance assets for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Beginning balance		Net increase (decrease)¹			Ending balance
Reserve for outstanding claims
General insurance		440,104		(48,799	)		391,305
Automobile insurance		15,904		39			15,943
Long-term insurance		83,938		3,949			87,887

		539,946		(44,811	)		495,135

Unearned premium reserve
General insurance		208,014		10,465			218,479
Automobile insurance		17,878		(505	)		17,373
Long-term insurance		—		2			2

		225,892		9,962			235,854

Total reinsurance assets		765,838		(34,849	)		730,989
Allowance for impairment		919		(181	)		738

Total reinsurance assets, net		764,919		(34,668	)		730,251

¹	Gains or losses on foreign currency translation of foreign operations, W10,417 million, is included.


	2016
(In millions of won)	Beginning balance		Net increase (decrease)²			Ending balance
Reserve for outstanding claims
General insurance		465,338		(16,129	)		449,209
Automobile insurance		16,819		(1,420	)		15,399
Long-term insurance		62,578		4,344			66,922

		544,735		(13,205	)		531,530

Unearned premium reserve
General insurance		214,869		1,616			216,485
Automobile insurance		17,294		999			18,293
Long-term insurance		—		212			212

		232,163		2,827			234,990

Total reinsurance assets		776,898		(10,378	)		766,520
Allowance for impairment		664		25			689

Total reinsurance assets, net		776,234		(10,403	)		765,831

¹	Gains or losses on foreign currency translation of foreign operations, W4,876 million, is included.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

14. Investment property

(1) Investment property as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017			December 31, 2016
Land
Acquisition costs		84,247			84,389
Building
Acquisition costs		240,747			238,079
Accumulated depreciation		(54,369	)		(52,876	)

		270,625			269,592

(2) Changes in investment property for the three-month periods ended March 31, 2017 and 2016 are as follows:


	2017
(In millions of won)	Beginning balance		Depreciation¹			Transfer from(to) property and equipment			Ending balance
Land		84,389		—			(142	)		84,247
Building		185,203		(1,507	)		2,682			186,378

		269,592		(1,507	)		2,540			270,625

¹	Depreciation expenses on investment properties are included in administrative expenses for real estate.


	2016
(In millions of won)	Beginning balance		Depreciation¹			Transfer from(to) property and equipment		Ending balance
Land		112,197		—			501		112,698
Building		221,539		(2,135	)		80,002		299,406

		333,736		(2,135	)		80,503		412,104

¹	Depreciation expenses on investment properties are included in administrative expenses for real estate.

(3) Gain (loss) on investment property

Rent income and expense on investment property for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Rent income		4,322		4,649
Operating expenses related to investment property		1,637		2,941

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

15. Property and equipment

(1) Property and equipment as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017
(In millions of won)	Acquisition costs		Accumulated depreciation		Carrying value
Land		213,611		—		213,611
Building		667,909		160,473		507,436
Structure		24,765		4,788		19,977
Equipment		166,800		124,289		42,511
Vehicles		611		418		193
Others		1,236		739		497
Construction in progress		127		—		127

		1,075,059		290,707		784,352


	December 31, 2016
(In millions of won)	Acquisition costs		Accumulated depreciation		Carrying value
Land		213,469		—		213,469
Building		670,614		156,268		514,346
Structure		24,388		4,407		19,981
Equipment		164,685		121,335		43,350
Vehicles		630		413		217
Others		1,327		844		483
Construction in progress		88		—		88

		1,075,201		283,267		791,934

(2) Changes in the property and equipment for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Beginning balance		Acquisition		Disposal			Depreciation ¹			Transfer from(to) investment			Others			Ending balance
Land		213,469		—		—			—			142			—			213,611
Building		514,346		464		(469	)		(4,223	)		(2,682	)		—			507,436
Structure		19,981		355		—			(380	)		—			21			19,977
Equipment		43,350		2,390		—			(3,196	)		—			(33	)		42,511
Vehicles		217		—		—			(14	)		—			(10	)		193
Others		483		—		—			(171	)		—			185			497
Construction in progress		88		39		—			—			—			—			127

		791,934		3,248		(469	)		(7,984	)		(2,540	)		163			784,352

¹	Depreciation expenses are included in insurance operating expenses, administrative expenses for asset and claim survey expenses paid.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


	2016
(In millions of won)	Beginning balance		Acquisition		Disposal			Depreciation ¹			Transfer from(to) investment			Others			Ending balance
Land		186,278		—		—			—			(501	)		—			185,777
Building		526,320		—		(748	)		(3,796	)		(80,002	)		1			441,775
Structure		526		—		—			(13	)		—			—			513
Equipment		47,109		1,815		(8	)		(3,946	)		—			(6	)		44,964
Vehicles		276		—		—			(19	)		—			2			259
Others		369		—		—			(132	)		—			183			420

		760,878		1,815		(756	)		(7,906	)		(80,503	)		180			673,708

¹	Depreciation expenses are included in insurance operating expenses, administrative expenses for asset and claim survey expenses paid.

16. Insured assets

The details of buildings and equipment insured against fire and other casualty as of March 31, 2017 and December 31, 2016, are summarized as follows:


	March 31, 2017
(In millions of won)	Amount insured		Insurance company
Building ¹		1,069,767		Samsung Fire Marine Insurance Co., Ltd
Equipment		113,125		Samsung Fire Marine Insurance Co., Ltd

		1,182,892

¹	Building classified as property and equipment and investment property are both included.


	December 31, 2016
(In millions of won)	Amount insured		Insurance company
Building ¹		1,069,767		Samsung Fire Marine Insurance Co., Ltd
Equipment		113,125		Samsung Fire Marine Insurance Co., Ltd

		1,182,892

¹	Building classified as property and equipment and investment property are both included.

Beside the assets above, the Parent Company subscribes directors and officers liability insurance and gas accidents liability insurance from Samsung Fire & Marine Insurance Co., Ltd.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

17. Intangible assets

(1) Intangible assets as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017
(In millions of won)	Acquisition costs		Accumulated amortization		Accumulated impairment		Carrying value
Membership		23,710		—		5,378		18,332
Software		48,191		39,274		—		8,917
Development cost		129,872		118,392		—		11,480
Others		30		—		—		30

		201,803		157,666		5,378		38,759


	December 31, 2016
(In millions of won)	Acquisition costs		Accumulated amortization		Accumulated impairment		Carrying value
Membership		23,196		—		6,757		16,439
Software		47,861		39,222		—		8,639
Development cost		132,658		119,890		—		12,768
Others		30		—		—		30

		203,745		159,112		6,757		37,876

(2) Changes in the intangible assets for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Beginning balance		Acquisitions		Transfer to other accounts			Disposal			Amortization¹			Impairment			Ending balance
Membership		16,439		3,059		—			(1,108	)		—			(58	)		18,332
Software		8,639		1,088		48			(1	)		(857	)		—			8,917
Development cost		12,768		161		(133	)		—			(1,316	)		—			11,480
Other		30		—		—			—			—			—			30

		37,876		4,308		(85	)		(1,109	)		(2,173	)		(58	)		38,759

¹	Amortization of intangible assets is included in other expenses.


	2016
(In millions of won)	Beginning balance		Acquisitions		Transfer to other accounts		Disposal			Amortization¹			Impairment		Ending balance
Membership		19,653		2,813		—		(880	)		—			83		21,669
Software		9,362		216		—		(3	)		(1,006	)		—		8,569
Development cost		12,138		614		245		—			(1,271	)		—		11,726
Other		38		—		—		—			—			—		38

		41,191		3,643		245		(883	)		(2,277	)		83		42,002

¹	Amortization of intangible assets is included in other expenses.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(3) Intangible assets with indefinite useful life as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Condominium memberships		5,586		5,622
Golf memberships		12,386		10,457
Others		360		360

		18,332		16,439

18. Assets held-for-sale

The assets classified as assets held-for-sale as of March 31, 2017 and December 31, 2016 are as follows¹:


(In millions of won)	March 31, 2017		December 31, 2016
Equipment and properties²		—		4,048

¹	Assets held for sale are measured at the lower of carrying amount and fair value less cost of disposal.

²	The Group classified certain equipment and properties as assets held for sale. The disposal of the assets held for sale was completed during January 2017.

19. Deferred acquisition costs

Changes in the deferred acquisition costs for the three-month periods ended March 31, 2017 and 2016, are as follows.


	2017
	Beginning		Expenditure								Ending
(In millions of won)	balance		Total		Expensed		Deferred		Decrease		balance
Pension		27,435		790		180		610		3,961		24,084
Long-term insurance		1,642,222		182,227		11,990		170,237		180,769		1,631,690

		1,669,657		183,017		12,170		170,847		184,730		1,655,774


	2016
	Beginning		Expenditure								Ending
(In millions of won)	balance		Total		Expensed		Deferred		Decrease		balance
Pension		43,851		1,165		191		974		5,334		39,491
Long-term insurance		1,611,003		171,439		8,781		162,658		161,933		1,611,728

		1,654,854		172,604		8,972		163,632		167,267		1,651,219

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

20. Other assets

(1) Other assets as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Compensation receivables		31,846		32,344
Prepaid expenses		18,835		8,300
Advance payments		6,838		3,478
Others		461		294

		57,980		44,416

(2) Changes in the compensation receivables for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017							2016
(In millions of won)	Beginning balance		Increase (Decrease)			Ending balance		Beginning balance		Increase (Decrease)			Ending balance
General insurance		3,388		465			3,853		3,869		571			4,440
Automobile insurance		26,416		(1,177	)		25,239		25,627		281			25,908
Long-term insurance		2,540		214			2,754		2,361		(36	)		2,325

		32,344		(498	)		31,846		31,857		816			32,673

21. Assets provided as collateral

Assets provided as collateral as of March 31, 2017 and December 31, 2016, are as follows:

(In millions of won)

Collateral
provided to

March 31,
2017

December 31,
2016

Remark

Government and public bonds

Industrial Bank and 6 others

502,047

503,893

Swap contract

ANZ Bank

45,071

45,157

Reinsurance contract

547,118

549,050

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

22. Insurance liabilities

Changes in the insurance liabilities for the three-month periods ended March 31, 2017 and 2016 are as follows:


	2017
(In millions of won)	Beginning balance		Net increase (decrease) ¹			Ending balance
Long-term insurance premium reserve:
Long-term insurance contract		18,819,064		389,743			19,208,807
Long-term investment contract		112,822		388			113,210

		18,931,886		390,131			19,322,017

Reserve for outstanding claims:
General insurance		828,200		(78,125	)		750,075
Automobile insurance		438,670		(4,838	)		433,832
Long-term insurance		786,988		21,881			808,869

		2,053,858		(61,082	)		1,992,776

Unearned premium reserve:
General insurance		367,083		43,902			410,985
Automobile insurance		971,747		42,734			1,014,481
Long-term insurance		15,222		(1,126	)		14,096

		1,354,052		85,510			1,439,562

Reserve for participating policyholders’ dividends on long-term insurance		84,383		(589	)		83,794
Excess participating policyholders’ dividends reserve on long-term insurance		25,540		5,100			30,640
Reserve for compensation for losses on dividend-paying insurance contracts		20,650		—			20,650

		22,470,369		419,070			22,889,439

¹	The amounts of net increase or decrease in insurance liabilities include the effects from foreign currencies translation at foreign operations, which is W27,416 million.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


	2016
(In millions of won)	Beginning balance		Net increase (decrease) ¹			Ending balance
Long-term insurance premium reserve:
Long-term insurance contract		17,020,163		446,472			17,466,635
Long-term investment contract		115,062		(46	)		115,016

		17,135,225		446,426			17,581,651

Reserve for outstanding claims:
General insurance		904,610		(27,882	)		876,728
Automobile insurance		397,494		(4,563	)		392,931
Long-term insurance		651,899		27,762			679,661

		1,954,003		(4,684	)		1,949,320

Unearned premium reserve:
General insurance		342,079		23,033			365,112
Automobile insurance		881,794		34,567			916,360
Long-term insurance		24,289		(1,787	)		22,502

		1,248,162		55,812			1,303,974

Reserve for participating policyholders’ dividends on long-term insurance		66,936		8,142			75,077
Excess participating policyholders’ dividends reserve on long-term insurance		28,589		(2,101	)		26,488
Reserve for compensation for losses on dividend-paying insurance contracts		15,075		—			15,074

		20,447,990		503,595			20,951,584

¹	The amounts of net increase or decrease in insurance liabilities include the effects from foreign currencies translation at foreign operations, which is W8,603 million.

23. Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Derivatives liabilities for trading purpose
Related to currency		—		9,388
Others		1		3

		1		9,391

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

24. Other financial liabilities

(1) Other financial liabilities as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Insurance accounts payable		318,026		377,484
Accrued expenses		84,278		97,849
Accounts payable		178,308		13,054
Deposit received		17,088		12,147
Security deposit		23,751		26,375
Non-controlling interests		4,397		4,362

		625,848		531,271

(2) Insurance accounts payable as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Claims payable		4,370		4,005
Due to agents		77,946		78,288
Premiums refund payable		433		2,004
Coinsurance payable		1,985		1,621
Payables related to agency business		9,576		16,992
Reinsurance accounts payable		112,779		124,445
Overseas reinsurance premiums payable		110,936		107,281
Deposits on reinsurance treaty ceded		1		42,848

		318,026		377,484

25. Provisions

Provisions as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Asset retirement obligation		863		906
Dormant insurance claims liabilities		27,893		28,312
Provisions for undrawn commitment liabilities		19		18
Others		33,367		33,407

		62,142		62,643

(2) Changes in the provisions for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Beginning balance		Occurrence		Used			Increase ¹		Reversal ¹			Ending balance
Asset retirement obligation		906		207		—			—		(250	)		863
Dormant insurance claims liabilities		28,312		—		(7,546	)		7,127		—			27,893
Others		33,407		—		(40	)		—		—			33,367
Undrawn commitments		18		—		—			1		—			19

		62,643		207		(7,586	)		7,128		(250	)		62,142

¹	Increase and reversal of provisions are included in other income and other expenses.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


	2016
(In millions of won)	Beginning balance		Occurrence		Used			Increase ¹		Reversal ¹			Ending balance
Asset retirement obligation		832		182		—			—		(199	)		815
Dormant insurance claims liabilities		30,629		—		(7,319	)		10,104		—			33,414
Others		15,817		—		(2,831	)		—		—			12,986

		47,278		182		(10,150	)		10,104		(199	)		47,215

¹	Increase and reversal of provisions are included in other income and other expenses.

26.

Liability for defined benefit plans and share-based payments

(1) Assets and liabilities for defined benefit plans as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017			December 31, 2016
Present value of defined benefit obligation		287,843			280,615
Fair value of plan assets		(181,757	)		(189,173	)

Defined benefit liabilities in the consolidated financial position		106,086			91,442

(2) Changes in the present value of defined benefit obligation for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017			2016
Beginning balance		280,615			269,391
Current service cost		7,063			6,958
Past service cost		7,596			—
Interest cost		1,845			1,731
Benefits paid		(9,603	)		(1,689	)
Transfer in		743			540
Transfer out		(415	)		(99	)
Others		(1	)		2

Ending balance		287,843			276,834

(3) Changes in the fair value of plan assets for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017			2016
Beginning balance		189,173			165,993
Interest income		1,207			1,063
Remeasurements loss		(564	)		(533	)
Benefits paid		(8,181	)		(1,132	)
Transfer in		743			540
Transfer out		(415	)		(99	)
Others		(206	)		(897	)

Ending balance		181,757			164,935

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(4) Profit or loss on liability for defined benefit plans for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)¹	2017			2016
Current service cost		7,063			6,958
Past service cost		7,596			—
Interest cost		1,845			1,731
Interest income		(1,207	)		(1,063	)

		15,257			7,626

¹	Profit or loss on liability for defined benefit plans are included in insurance operating expenses, administrative expenses for assets, claim survey expenses paid and other expenses.

(5) Share-based payments

KB Financial Group Inc. signs on stock grants contracts with directors of the Parent Company. At the inception, the maximum granting amount is decided and the actual granting amount is upon each director’s performance, which can be shown by the achievement of pre-determined goal.

The Group provided option to the directors and employees for time of deferred payment and ratio and period of payments. In accordance with the option, after the deferred payment is decided, certain portion of the given payments will be deferred no more than 5 years after the termination of service.

(a) The details of stock grants related to long-term performance as of March 31, 2017, are as follows:


(In shares)	Grant Date	Amount¹		Vesting Condition
1-2	June 24, 2015		3,122	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,4
1-3	June 24, 2015		30,897	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,5
2-1	January 1, 2016		6,554	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,5
3-1	January 5, 2016		1,830	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,4
4-1	January 14, 2016		9,101	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,5
5-1	February 1, 2016		4,955	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,5
6-1	March 18, 2016		25,348	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,3
7-1	January 1, 2017		42,579	Services fulfillment, achievement of targets on the basis of market and non-market performance ^2,5
Deferred grant in 2015			4,316
Deferred grant in 2016			9,441

			138,143

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

¹	Granted shares represent the total number of shares initially granted to directors and employees that have residual shares at the end of reporting period (Deferred grants are residual shares as of March 31, 2017).

²	Certain portion of the granted shares is compensated over a maximum period of five years.

³	30% of the number of certain granted shares to be compensated is determined upon the accomplishment of relative TSR, while 70% is determined upon the accomplishment of Company Performance Results.

⁴	50% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 50% is determined upon the accomplishment of relative TSR.

⁵	30%, 40% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR, Performance Results and the Company Performance Results, respectively.

The compensation cost that the Parent Company recognized as expenses for share-based payments for the three-month periods ended March 31, 2017 and 2016, are W996 million and W272 million, respectively. The compensation costs amounting to W3,515 million and W2,945 million were recognized as long-term accrued expenses for KB Financial Group, Inc. as of March 31, 2017 and 2016, respectively.

(b) The details of stock grants related to short-term performance as of March 31, 2017, are as follows:


(In shares)	Grant date	Granted shares ¹		Vesting Condition
Stock granted on 2015	June 24, 2015		25,383	Proportional to service period
Stock granted on 2016	January 1, 2016		40,817	Proportional to service period
Stock granted on 2017	January 1, 2017		15,535	Proportional to service period

			81,735

¹	Granted shares are determined by performance and compensated over three or five years.

The compensation cost that the Parent Company recognized as expenses for share-based payments for the three-month periods ended March 31, 2017 and 2016, are W656 million and W898 million, respectively. The compensation costs amounting to W3,530 million and W3,111 million were recognized as short-term accrued expenses for KB Financial Group, Inc. as of March 31, 2017 and December 31, 2016, respectively.

(c) Expected volatility is based on the historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the grant. And the current stock price as of March 31, 2017, was used for the underlying asset price. Additionally, the average three-year historical dividend rate was used as the expected dividend rate.

27. Other liabilities

Other liabilities as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Unearned revenues		355		545
Advance premiums received		24,083		30,343
Withholdings		8,891		5,946
Other taxes payable		1,402		1,838
Others		1,399		1,567

		36,130		40,239

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

28. Assets and liabilities denominated in foreign currencies

Assets and liabilities denominated in foreign currencies as of March 31, 2017 and December 31, 2016, are as follows:

(In millions of won, In thousands of US Dollar, Australian Dollar, Euro, Japanese Yen, Chinese Yuan, British Pound, Vietnamese Dong, Indonesia Rupiah, Singapore Dollar and Hong Kong Dollar.)


		March 31, 2017				December 31, 2016
	Currency	Foreign currency		Equivalent in Korean won		Foreign currency		Equivalent in Korean won
Financial assets
Cash and cash equivalents	USD		51,552		57,537		38,855		46,956
	AUD		16		14		22		19
	EUR		163		195		204		259
	SGD		52		42		58		48
	JPY		1,029		10		1,488		15
	IDR		20,694,629		1,734		22,280,599		2,001
	GBP		9		13		126		187
	CNY		81,097		13,160		66,020		11,439
Financial assets at fair value through profit or loss	USD		425,715		475,140		357,512		432,053
	IDR		2,726,471		228		2,385,091		214
Available-for-sale securities	USD		3,129,122		3,492,413		3,148,363		3,804,796
	EUR		36,127		43,086		30,455		38,604
	HKD		—		—		10,367		1,615
	CNY		—		—		12,211		2,116
	IDR		287,600		24		287,600		26
Held-to-maturity financial assets	USD		490,467		547,410		117,511		142,013
	IDR		26,001,000		2,179		27,001,000		2,425
Loans	USD		50,238		56,071		48,445		58,546
	IDR		515,467		43		584,292		52
Other receivables	AUD		134		115		170		148
	USD		74,739		83,416		76,862		92,888
	EUR		512		611		575		729
	JPY		22,442		224		36,631		380
	GBP		149		207		101		149
	VND		1,615,369		79		1,866,567		99
	IDR		155,575,139		13.037		164,043,145		14,731
	SGD		155		124		134		112
	CNY		366,465		59,466		365,159		63,268

Total assets	AUD		151		129		192		167
	EUR		36,802		43,892		31,234		39,592
	GBP		158		221		227		336
	CNY		447,562		72,626		443,390		76,822
	VND		1,615,369		79		1,866,567		99
	JPY		23,471		234		38,119		395
	USD		4,221,833		4,711,987		3,787,548		4,577,252
	IDR		205,800,306		17,245		216,581,727		19,449
	SGD		207		166		192		160
	HKD		—		—		10,367		1,615

Financial liabilities
Other financial liabilities	USD		18,126		20,230		20,340		24,581
	EUR		612		730		361		458
	GBP		129		180		125		186
	IDR		8,762,510		734		21,696,260		1,948
	CNY		129,260		20,975		111,583		19,333
	THB		1		—		6,043		203

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

29. Equity

(1) Equity as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)		March 31, 2017			December 31, 2016
Capital stock	Common stock		33,250			33,250
Capital surplus	Share premium		217,046			217,046
	Gain on disposal of treasury stock		131,409			131,409

			348,455			348,455

Capital adjustments	Others		(9	)		(9	)

			(9	)		(9	)

Accumulated other comprehensive income	Net change in fair value of available-for-sale financial assets		178,991			174,926
	Net change in fair value of cash flow hedges		1,583			881
	Foreign currency translation differences for foreign operations		(24,671	)		(8,488	)
	Revaluation of property and equipment		77,411			77,411
	Remeasurements of defined benefit plans		(48,279	)		(47,851	)
	Other comprehensive income arising from separate account		6,140			4,304

			191,175			201,183

Accumulated other comprehensive income for assets held for sale	Revaluation of property and equipment		—			314

Retained earnings	Legal reserve¹		16,625			15,000
	Other reserve		1,068,391			858,391
	Regulatory reserve for credit loss²		55,544			55,922
	Emergency risk reserve²		663,204			619,688
	Retained earnings before appropriation		116,419			310,864

			1,920,183			1,859,865
Non-controlling interests			4,189			4,407

			2,497,243			2,447,465

In accordance with Korean Commercial Law, the Group is required to reserve over 10% of its dividends as legal reserve on every financial reporting period until the reserve reaches half of its capital. It is restricted to distribute as a cash dividend and allowed to use only for retained earning deficits from prior years and capital transfer by the authorization of shareholders.

²	Retained earnings restricted to distribute as dividends by appropriation of retained earnings at the end of reporting period

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) Capital stock as of March 31, 2017 and December 31, 2016, are as follows:


	March 31, 2017		December 31, 2016
Number of shares authorized		200,000,000		200,000,000
Par value per share (in Korean won)		500		500
Number of shares issued		66,500,000		66,500,000

(3) Accumulated other comprehensive income

Changes in accumulated other comprehensive income for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Valuation gain (loss) on available- for-sale financial assets			Valuation gain (loss) on cash flow hedges			Foreign currency translation differences for foreign operations			Remeasure- ments of defined benefit plans			Other comprehensive income arising from separate account			Revaluation of property and equipment		Total
Beginning balance		174,926			881			(8,488	)		(47,851	)		4,304			77,411		201,183
Net change due to valuation		34,621			—			—			(564	)		2,993			—		37,050
Change due to impairment and disposal		(28,667	)		92,683			—			—			(571	)		—		63,445
Effect of hedge accounting		—			(91,757	)		—			—			—			—		(91,756	)
Effect of foreign currency movements		(591	)		—			(16,183	)		—			—			—		(16,775	)
Effect of deferred tax		(1,298	)		(224	)		—			136			(586	)		—		(1,972	)

Ending balance		178,991			1,583			(24,671	)		(48,279	)		6,140			77,411		191,175

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


	2016
(In millions of won)	Valuation gain (loss) on available- for-sale financial assets			Valuation gain (loss) on cash flow hedges			Foreign currency translation differences for foreign operations			Remeasure- ments of defined benefit plans			Other comprehensive income arising from separate account			Revaluation of property and equipment		Total
Beginning balance		265,887			663			(11,664	)		(58,352	)		11,071			78,053		285,658
Net change due to valuation		153,967			—			—			(533	)		15,967			—		169,401
Change due to impairment and disposal		(1,110	)		(415	)		—			—			(343	)		—		(1,868	)
Effect of hedge accounting		—			765			—			—			—			—		765
Effect of foreign currency movements		(143	)		—			(2,485	)		—			—			—		(2,628	)
Effect of deferred tax		(36,957	)		(85	)		—			129			(3,781	)		—		(40,694	)

Ending balance		381,644			928			(14,149	)		(58,756	)		22,914			78,053		410,634

(4) Regulatory reserve for credit loss

(a) Regulatory reserve for credit loss as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017			December 31, 2016
Regulatory reserve for credit loss		55,544			55,922
Estimated reversal of Regulatory reserve for credit loss		(1,994	)		(378	)

		53,550			55,544

(b) Profit for the period adjusted by regulatory reserve for credit loss for the three-month periods ended March 31, 2017 and 2016 were as follows:


(In millions of won)	2017		2016
Profit for the period		99,983		75,788
Reversal (provision) of regulatory reserve for credit loss		1,994		(697	)

Profit for the period adjusted by regulatory reserve for credit loss¹		101,977		75,091

Earnings per share adjusted by regulatory reserve for credit loss (in won)		1,533		1,252

¹	Adjusted profit after provision or reversal of regulatory reserve for credit losses is not in accordance with Korean IFRS and calculated on the assumption that provision or reversal of regulatory reserve for credit losses before income tax is adjusted to the net income.

(5) Emergency risk reserve

(a) Emergency risk reserve in the Regulation on Supervision of Insurance Business as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Emergency risk reserve		663,204		619,688
Estimated emergency risk reserve to be provided		16,432		43,516

		679,636		663,204

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(b) Profit for the period adjusted by emergency risk reserve for the three-month periods ended March 31, 2017 and 2016, were as follows:


(In millions of won)	2017			2016
Profit for the period		99,983			75,788
Provision for emergency risk reserve for loan loss		(16,432	)		(10,740	)

Profit for the period adjusted by emergency risk reserve¹		83,551			65,048

Earnings per share adjusted by emergency risk reserve (in won)		1,256			1,084

¹	Adjusted profit after provision or reversal of emergency risk reserve is not in accordance with Korean IFRS and calculated on the assumption that provision or reversal of emergency risk reserve before income tax is adjusted to the net income.

30. Premium Income

Premium income for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017
	General insurance			Automobile insurance			Long-term and individual insurance			Total
Direct premium written by the Group		274,752			547,048			1,670,404			2,492,204
Assumed reinsurance premium		7,524			—			—			7,524
Refund of surrender value		(3,028	)		(25,764	)		(219	)		(29,011	)

		279,248			521,284			1,670,185			2,470,717


(In millions of won)	2016
	General insurance			Automobile insurance			Long-term and individual insurance			Total
Direct premium written by the Group		252,870			497,290			1,611,948			2,362,108
Assumed reinsurance premium		5,969			—			—			5,969
Refund of surrender value		(4,283	)		(21,627	)		(168	)		(26,078	)

		254,556			475,663			1,611,780			2,341,999

31. Insurance claims paid, dividend expenses and refunds of surrender value

Insurance claims paid, dividend expenses and refunds of surrender value for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	General insurance			Automobile insurance			Long-term and Individual insurance			Total
Insurance claims paid
Direct premium written by the Group		142,224			365,888			399,835			907,947
Assumed reinsurance premium		822			—			—			822
Refund of premium		(5,043	)		(19,738	)		(1,091	)		(25,872	)
Refund of assumed reinsurance premium		(17	)		—			—			(17	)

		137,986			346,150			398,744			882,880

Dividend expenses		—			—			1,312			1,312
Refunds of surrender value		—			—			594,620			594,620

		137,986			346,150			994,676			1,478,812

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


	2016
(In millions of won)	General insurance			Automobile insurance			Long-term and Individual insurance			Total
Insurance claims paid
Direct premium written by the Group		145,075			347,501			351,575			844,151
Assumed reinsurance premium		2,605			—			—			2,605
Refund of premium		(1,895	)		(18,007	)		(971	)		(20,873	)
Refund of assumed reinsurance premium		(342	)		—			—			(342	)

		145,443			329,494			350,604			825,541
Dividend expenses		—			—			1,146			1,146
Refunds of surrender value		—			—			545,414			545,414

		145,443			329,494			897,164			1,372,101

32. Reinsurance income and expenses

Income and expenses related to reinsurance transactions for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	General insurance			Automobile insurance			Long-term and individual insurance			Total
Reinsurance Income
Reinsurance claims		69,793			9,171			59,127			138,091
Refund of reinsurance claims		(3,442	)		—			(188	)		(3,630	)

		66,351			9,171			58,939			134,461

Reinsurance expenses
Reinsurance premium		144,652			9,601			65,425			219,678
Reversal of refund of surrender value		(1,004	)		—			—			(1,004	)

		143,648			9,601			65,425			218,674

Reinsurance commissions ¹		22,168			(273	)		73			21,968
Reinsurance profit commissions ¹		448			—			(1	)		447
Assumed reinsurance commissions ²		1,323			—			—			1,323
Assumed reinsurance profit commissions ²		39			—			—			39

¹	Included in recovered expenses

²	Included in insurance operating expenses


	2016
(In millions of won)	General insurance			Automobile insurance		Long-term and individual insurance			Total
Reinsurance Income
Reinsurance claims		84,480			9,409		51,964			145,853
Refund of reinsurance claims		(1,008	)		—		(219	)		(1,227	)

		83,472			9,409		51,745			144,626

Reinsurance expenses
Reinsurance premium		151,233			10,899		56,417			218,549
Reversal of refund of surrender value		(623	)		—		—			(623	)

		150,610			10,899		56,417			217,926

Reinsurance commissions ¹		22,364			121		153			22,638
Reinsurance profit commissions ¹		1,132			—		—			1,132
Assumed reinsurance commissions ²		850			—		—			850
Assumed reinsurance profit commissions ²		(34	)		—		—			(34	)

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

¹	Included in recovered expenses

²	Included in insurance operating expenses

33. Interest income and expense

(1) Interest income and expense for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Interest income
Cash and cash equivalents		674		914
Trading assets		2,909		1,866
Financial assets designated at fair value through profit or loss		7,516		3,883
Available-for-sale financial assets		57,183		59,728
Held-to-maturity financial assets		28,322		18,412
Loans		69,698		71,570
Other receivables		1,408		2,988
Interest of other income		255		333

		167,965		159,694

Interest expense
Borrowings		—		4
Other		174		99

		174		103

(2) Interest income recognized on impaired financial assets for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Available-for-sale financial assets		—		45
Loans and other receivables		269		332

		269		377

34. Gain and loss on valuation and disposal of securities

(1) Gain on valuation and disposal of securities for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Trading assets
Gain on disposal		1,525		1,910
Gain on valuation		571		2,478
Financial assets designated at fair value through profit or loss
Gain on disposal		19		—
Gain on valuation		2,804		6,477
Available-for-sale financial assets
Gain on disposal		28,008		29,190

		32,927		40,055

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) Loss on valuation and disposal of securities for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Trading assets
Loss on disposal		536		1,682
Loss on valuation		157		230
Financial assets designated at fair value through profit or loss
Loss on disposal		3,130		—
Loss on valuation		813		1,393
Available-for-sale financial assets
Loss on disposal		2,585		6,305
Loss on impairment		1,596		9,878

		8,818		19,488

35. Gain and loss on valuation and disposal of loans and other receivables

Gain and loss on valuation and disposal of loans and other receivables for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Reversal of impairment loss		72		1

		72		1


Loss on impairment		4,823		7,710

		4,823		7,710

36. Gain and loss on valuation and disposal of derivatives

Gain and loss on valuation and disposal of derivatives for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Gain on disposal		49,745		3,487
Gain on valuation		281,338		75,797

		331,083		79,284


Loss on disposal		874		16,175
Loss on valuation		327		489

		1,201		16,664

37. Recovered Expenses

Recovered Expenses for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Reinsurance commissions		21,968		22,638
Reinsurance profit commissions		447		1,132
Agent commission		740		573

		23,155		24,343

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

38. Insurance operating expenses, administrative expenses for assets and claim survey expenses paid

Insurance operating expenses, administrative expenses for assets and claim survey expenses paid for the three-month periods ended March 31, 2017 and 2016, are as follows:


	2017
(In millions of won)	Insurance operating expenses		Administrative expenses for assets		Claim survey expenses paid
Short-term employee benefits		60,967		1,794		27,127
Post-employment benefits		12,797		234		4,084
Other long-term employee benefits		21		—		6
Welfare expenses		5,980		19		3,682
General and administrative expenses		105,057		11,921		13,289
Acquisition cost		15,253		—		—
Agent commission		65,329		—		—
Claim survey expenses paid		—		—		11,928
Claim survey expenses recovered		—		—		(4,412	)
Assumed reinsurance commission paid		1,323		—		—
Others		595		—		—

		267,322		13,968		55,704


	2016
(In millions of won)	Insurance operating expenses		Administrative expenses for assets		Claim survey expenses paid
Short-term employee benefits		60,973		1,712		26,128
Post-employment benefits		6,955		176		2,614
Other long-term employee benefits		21		1		5
Welfare expenses		2,936		11		3,312
General and administrative expenses		98,026		12,763		9,616
Acquisition cost		16,071		—		—
Agent commission		58,979		—		—
Claim survey expenses paid		—		—		18,633
Claim survey expenses recovered		—		—		(6,448	)
Assumed reinsurance commission paid		850		—		—
Other		493		—		—

		245,304		14,663		53,860

39. Other income and expenses

(1) Other income for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Reversal of provision		250		199
Commission income		899		1,257
Rent income		5,796		4,513
Separate account revenues		5,187		964
Miscellaneous operating income		1,152		4,539

		13,284		11,472

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) Other expenses for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Increase in provision		7,128		10,104
Separate account expenses		2,171		2,257
Amortization of intangible assets		115		—
Other expenses related to the subsidiaries		9,927		8,530
Miscellaneous operating expenses		575		632

		19,916		21,523

(3) Other expenses related to the subsidiaries for the three-month periods ended March 31, 2017 and 2016, are as follow:


(In millions of won)	2017			2016
Compensations		6,745			5,986
Post-employment benefits		549			499
Welfare expenses		1,316			1,178
Electronic operating expenses		175			93
Rental expenses		(193	)		(243	)
Fee and commission		190			114
Entertainment expenses		25			25
Advertising		7			2
Depreciation		72			26
Amortization of intangible assets		2			20
Tax and dues		221			191
Others		818			639

		9,927			8,530

(4) Commission income for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Corporate loan		495		639
Stocks		5		3
Debt securities		109		96
Others		290		519

		899		1,257

40. Non-operating income and expenses

(1) Non-operating income for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Gain on disposal of assets held for sales		3,781		—
Gain on valuation of investment in associate		—		247
Gain on disposal of property and equipment		319		6
Gain on disposal of intangible assets		33		—
Reversal of impairment loss of intangible assets		—		90
Miscellaneous non-operating income		349		403

		4,482		746

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(2) Non-operating expenses for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Donation		515		227
Loss on disposal of intangible assets		4		69
Impairment of intangible assets		58		6
Miscellaneous non-operating expenses		554		1,591

		1,131		1,893

41. Income tax expense

Income tax expense is recognized based on the best estimate of weighted average annual income tax rate expected for the full financial year. The estimated average annual income tax rate used for the three-month period ended March 31, 2017, is 24.2% (the estimated tax rate for the three-month period ended March 31, 2016: 24.2%).

42. Earnings per share

(1) Basic earnings per share for the three-month periods ended March 31, 2017 and 2016, is as follows:


	2017		2016
Profit for the period (in won) attributable to ordinary equity holders of the Parent Company		99,904,146,323		75,244,225,179
Weighted average number of common shares outstanding¹		66,500,000		60,000,000
Earnings per share (in won)		1,502		1,254

¹	Weighted-average number of common shares outstanding for the three-month periods ended March 31, 2017 and 2016 are same as the number of issued common shares at the beginning of the period

(2) Diluted earnings per share for the three-month periods ended March 31, 2017 and 2016 are the same as basic earnings per share as the Group does not have any diluted securities.

43. Commitments and contingencies

(1) The contract amounts of insurance policies in effect as of March 31, 2017, amount to W3,003,603,925 million (December 31, 2016: W3,072,061,112 million).

(2) The Group assumes and cedes a portion of total insurance premiums with Korean Re Co., Ltd. and foreign reinsurers including Munich Re. According to arrangements, the Group pays and receives reinsurance premium and commission fee by settlement with counter companies.

(3) Details of commitments between the Group and financial institutions as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)		Limit
Commitments	Financial institutions	March 31, 2017		December 31, 2016
Commitments on bank overdrafts	Shinhan Bank and others		2,000		2,000
Overdraft intra-day			60,000		60,000

			62,000		62,000

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(4) Payment guarantees offered by financial institutions as of March 31, 2017, are as follows:

(In US dollars)

Limit

Amount

Guaranteed period

Australia and New Zealand Bank

USD 25,000,000

USD 21,830,546

Dec. 31, 2016 ~
Dec. 30, 2017

(5) Other commitments provided by the Group as of March 31, 2017 and December 31, 2016 are as follow:


	Undrawn commitments
(In millions of won)	March 31, 2017		December 31, 2016
Loan commitments		485,673		557,113
Purchase of security investment		1,352,349		1,214,623

		1,838,022		1,771,736

(6) Pending litigations as a defendant as of March 31, 2017 and December 31, 2016 are as follows:


	March 31, 2017
(In millions of won)	Number of litigations		Amount of damage claim		Descriptions
Automobile insurance		1,224		48,316	Compensation claim & others
General/long-term insurance and others		428		278,949	Compensation claim & others

		1,652		327,265


	December 31, 2016
(In millions of won)	Number of litigations		Amount of damage claim		Descriptions
Automobile insurance		1,076		43,418	Compensation claim & others
General/long-term insurance and others		430		270,965	Compensation claim & others

		1,506		314,383

For the above pending litigations as a defendant, the Group has reserved estimated losses as a reserve for outstanding claims. As of March 31, 2017, such litigations are in process and the ultimate outcome of such litigations cannot be predicted.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

44. Related Party Transactions

(1) The related parties as of March 31, 2017 and December 31, 2016, are as follows:


March 31, 2017	December 31, 2016	Relationship
KB Financial Group Inc.	KB Financial Group Inc.	Others¹
Kookmin Bank	Kookmin Bank	Others²
KB Kookmin Card Co., Ltd.	KB Kookmin Card Co., Ltd.	Others²
KB Securities Co., Ltd.	KB Securities Co., Ltd.	Others²
KB Life Insurance Co., Ltd.	KB Life Insurance Co., Ltd.	Others²
KB Asset Management Co., Ltd.	KB Asset Management Co., Ltd.	Others²
KB Capital Co., Ltd.	KB Capital Co., Ltd.	Others²
KB Real Estate Trust Co., Ltd.	KB Real Estate Trust Co., Ltd.	Others²
KB Investment Co., Ltd.	KB Investment Co., Ltd.	Others²
KB Credit Information Co., Ltd.	KB Credit Information Co., Ltd.	Others²
KB Data Systems	KB Data Systems	Others²
KB Savings Bank Co., Ltd.	KB Savings Bank Co., Ltd.	Others²
Kookmin Bank (China) Ltd.	Kookmin Bank (China) Ltd.	Others²

¹	Entity over which the Group has significant influence.

²	Subsidiary of KB Financial Group Inc.

(2) Significant transactions which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2017 and 2016, are as follows:


		2017
(In millions of won)	Related parties	Revenues		Expenses
Others	KB Financial Group Inc.		105		—
	Kookmin Bank		22,008		6,211
	KB Kookmin Card Co., Ltd.		473		209
	KB Securities Co., Ltd.		1,325		3,502
	KB Life Insurance Co., Ltd.		94		—
	KB Asset Management Co., Ltd.		25		—
	KB Capital Co., Ltd.		1,238		908
	KB Real Estate Trust Co., Ltd.		17		—
	KB Investment Co., Ltd.		7		—
	KB Credit Information Co., Ltd.		2		166
	KB Data Systems		19		58
	KB Savings Bank Co., Ltd.		37		—
	Kookmin Bank (China) Ltd and others		11		—

			25,361		11,054

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


		2016
(In millions of won)	Related parties	Revenues		Expenses
Associates	Kocref Cr-reit XI		290		—
	LIG-Special Purpose Acquisition 2^nd Co., Ltd.		4		—
	LIG-ES Special Purpose Acquisition Co., Ltd.		4		—
Others	KB Financial Group Inc.		192		2,185
	Kookmin Bank		11,589		1,546
	KB Kookmin Card Co., Ltd.		1,086		3,186
	KB Securities Co., Ltd.		129		60
	KB Life Insurance Co., Ltd.		71		—
	KB Asset Management Co., Ltd.		32		39
	KB Capital Co., Ltd.		728		144
	KB Real Estate Trust Co., Ltd.		18		—
	KB Investment Co., Ltd.		10		—
	KB Credit Information Co., Ltd.		1		159
	KB Data Systems		17		30
	KB Savings Bank Co., Ltd.		35		1
	Kookmin Bank (China) Ltd and others		95		2

			14,301		7,352

(3) Repurchase transactions with related parties for the three-month periods ended March 31, 2016 are as follows:

(In millions of won)

2016

Transaction

Beginning
balance

Increase

(decrease)

Ending
balance

Others

Related individuals and others

RP Sold

477

29,796

30,273

(4) Account balances with related parties as of March 31, 2017 and December 31, 2016, are as follows:


		March 31, 2017
(In millions of won)	Related parties	Receivables		Payables
Others	KB Financial Group Inc.		—		7,334
	Kookmin Bank¹		32,596		9,994
	KB Kookmin Card Co., Ltd.²		200		1,297
	KB Securities Co., Ltd.		7,567		6,195
	KB Life Insurance Co., Ltd.		23		260
	KB Asset Management Co., Ltd.		—		41
	KB Capital Co., Ltd.		218		1,647
	KB Credit Information Co., Ltd		—		80
	KB Data Systems		—		46
	KB Savings Bank Co., Ltd.		—		73
	KB Real Estate Trust Co., Ltd.		—		22
	KB Investment Co., Ltd.		—		9
	Kookmin Bank (China) Ltd and others		2,450		—
	Retirement Pension		—		13,133

			43,054		40,131

¹	As of March 31, 2017, notional amount of financial derivatives assets and liabilities to Kookmin Bank amounts to W173,059 million

²	As of March 31, 2017, limit of unused commitment to KB Kookmin Card Co., Ltd. amounts to W54,838 million.

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016


		December 31, 2016
(In millions of won)	Related parties	Receivables		Payables
	KB Financial Group Inc.		—		6,349
	Kookmin Bank¹		26,532		12,549
	KB Kookmin Card Co., Ltd.²		7,943		7,343
Others	KB Securities Co., Ltd.		10,889		1,639
	KB Life Insurance Co., Ltd.		4		213
	KB Asset Management Co., Ltd.		—		286
	KB Capital Co., Ltd.		241		2,282
	KB Credit Information Co., Ltd		—		57
	KB Data Systems		—		53
	KB Savings Bank Co., Ltd.		—		121
	KB Real Estate Trust Co., Ltd.		—		35
	KB Investment Co., Ltd.		—		16
	Kookmin Bank (China) Ltd and others		7,402		—
	Retirement Pension		—		21,641

			53,011		52,584

¹	As of December 31, 2016, notional amount of financial derivatives assets and liabilities to Kookmin Bank amounts to W250,694 million

²	As of December 31, 2016, limit of unused commitment to KB Kookmin Card Co., Ltd. amounts to W20,859 million.

(5) Collateral the Group provide to the related parties as of March 31, 2017 and December 31, 2016, is as follows:


(In millions of won)	Collateral asset	March 31, 2017		December 31, 2016
Kookmin Bank	Government bond		50,000		50,000

(6) The details of assets pledged as collaterals from related parties as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	Assets pledged as collateral	March 31, 2017		December 31, 2016
KB Wise Star private Real Estate Investment Trust No. 2	Building/Land		26,000		26,000
Kookmin Bank	Securities		50,000		50,000

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

(7) Undrawn commitments the Group provided for related parties, as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	Related party	March 31, 2017		December 31, 2016
Purchase of security investment	KB-Solidus Global Healthcare Fund		8,200		8,200
Purchase of security investment	KB High-tech Company Investment Fund		1,400		2,800

(8) Key management personnel, including registered directors and non-registered outside directors compensation for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Short-term employee benefits	W	3,783		1,614
Retirement benefits		162		110

	W	3,945		1,724

(9) Loans for management personnel and employees as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017		December 31, 2016
Loans secured by real estate	W	212		242
Loans secured by credits		61		72
Loans secured by third party guarantees		14,995		15,677

	W	15,268		15,919

45. Separate account

(1) Separate account statements of financial position as of March 31, 2017 and December 31, 2016, are as follows:


(In millions of won)	March 31, 2017				December 31, 2016
	Retirement insurance		Retirement pension		Retirement insurance		Retirement pension
Assets¹
Cash and cash equivalents		9,608		161,948		9,552		75,696
Financial assets at fair value through profit or loss		—		50,386		—		100,800
Available-for-sale financial assets		—		2,531,776		—		2,302,531
Held-to-maturity financial assets		—		10,000		—		10,000
Derivative assets to hedge		—		8,689		—		919
Loans and other receivables		—		483,311		—		506,509
Non-financial assets		7		2,992		—		3
General accounts receivable¹		10		20,205		142		385,085

		9,625		3,269,307		9,694		3,381,543

Liabilities²
Other financial liabilities		20		721		4		6,370
General accounts receivable²		5		6,987		34		(6	)
Policyholders reserve (insurance)		9,600		—		9,656		—
Policyholders reserve (investment)		—		3,253,498		—		3,369,501

		9,625		3,261,206		9,694		3,375,865

Equity
Accumulated other comprehensive income		—		8,101		—		5,678

		9,625		3,269,307		9,694		3,381,543

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

¹	Separate account asset in the financial statement is the total amount of retirement insurance asset and retirement pension asset less the general accounts receivable.

²	Separate account liability in the financial statement is the total amount of retirement insurance liability and retirement pension liability less the general account payable.

(2) Separate account statements of comprehensive Income for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017					2016
	Retirement insurance			Retirement pension		Retirement insurance			Retirement pension
Income
Investment income		28			41,564		46			32,515
Other operating income		—			403		2			300

		28			41,967		48			32,815

Expenses
Policyholders reserve (insurance)		(57	)		—		(106	)		—
Policyholders reserve (investment)		—			16,266		—			19,085
Insurance claims paid		68			—		134			—
Investment expenses		3			21,019		2			13,207
Other operating expenses		14			4,682		18			523

		28			41,967		48			32,815

The revenue and expense of participating type specific account (participating retirement pension insurance) were not presented in the consolidated statements of comprehensive income of the general account. Revenue and expense of participating type specific account included in the operating performance above for the three-month periods ended March 31, 2017 and 2016 were W1,428 million and W968 million, respectively.

46. Supplemental cash flows information

(1) Cash and cash equivalents in statements of cash flows include deposits that have a short maturity of three months or less from the date of acquisition.

(2) Significant non-cash activities for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Transfer from investment property to owner-occupied property and equipment		2,540		80,503
Dividend Payable		39,900		24,000

KB Insurance Co., Ltd and Subsidiaries

Notes to the Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Unaudited), and December 31, 2016

47. Operating income

Operating income for the three-month periods ended March 31, 2017 and 2016, are as follows:


(In millions of won)	2017		2016
Operating revenue
Insurance operating revenue		2,628,333		2,511,785
Investment revenue		551,840		297,109
Other operating revenue		70,412		51,883

		3,250,585		2,860,777


Operating expenses
Insurance operating expenses		2,676,478		2,574,183
Investment expenses		33,803		64,254
Other operating expenses		413,168		125,183

		3,123,449		2,763,620

Operating income		127,136		97,157

48. Events after the Reporting Period

On April 14, 2017, the board of directors of KB Financial Group Inc, (“KB Financial Group”) resolved to conduct tender offers and a comprehensive stock swap to KB Financial Group’s stock. Accordingly, the Parent Company will become a wholly owned subsidiary of KB Financial Group.