EX-99.1(F)

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Exhibit 99.1(F)

KB Insurance Co., Ltd

(Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Financial Statements

December 31, 2015 and 2014

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Index

December 31, 2015 and 2014


	Page(s)

Independent Auditor’s Report		1~2

Consolidated Financial Statements

Consolidated Statements of Financial Position		3

Consolidated Statements of Comprehensive Income		4~5

Consolidated Statements of Changes in Equity		6~7

Consolidated Statements of Cash Flows		8~9

Notes to the Consolidated Financial Statements		10~111

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of

KB Insurance Co., Ltd (formerly LIG Insurance Co., Ltd)

We have audited the accompanying consolidated financial statements of KB Insurance Co., Ltd (formerly LIG Insurance Co., Ltd) and its subsidiaries(collectively referred to as the the “Group”), which comprise the consolidated statement of financial position as of December 31, 2015, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditors’ Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2015, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Korean IFRS.

Other Matters

The consolidated financial statements of the Group as of and for the year ended December 31, 2014, were audited by other auditors, whose report dated March 11, 2015, expressed an unmodified opinion on those statements. Those consolidated financial statements did not include the adjustments described in Note 2.2(3). However, the consolidated financial statements as of and for the year ended December 31, 2014, presented herein for comparative purposes, include such adjustments.

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

/s/ Samil PricewaterhouseCoopers

March 10, 2016

Seoul, Korea

This report is effective as of March 10, 2016, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Financial Position

December 31, 2015 and 2014


(In Korean won)	Note	2015			2014
Assets
Cash and cash equivalents	4,5,8,23,32		769,207,926,792			566,224,007,639
Financial assets at fair value through profit or loss	4,5,9,14,32		979,945,507,137			1,521,499,395,198
Available-for-sale financial assets	4,5,10,23,32		8,560,472,085,861			7,139,877,019,402
Held-to-maturity financial assets	4,5,11,32		2,148,197,811,515			1,635,316,856,821
Loans	4,5,12,32		6,755,519,047,911			6,420,032,957,683
Other receivables	4,5,12,23,32		907,175,730,176			1,145,210,169,719
Investments in associates	13		7,435,741,213			10,827,460,997
Derivative assets to hedge	4,5,14		11,177,788,388			32,597,634,168
Reinsurance assets	4,15		776,233,697,415			894,957,135,525
Investment property	16,18		333,736,147,564			315,747,244,117
Property and equipment	17,18		760,877,896,857			809,978,699,148
Intangible assets	19		41,191,160,904			51,227,861,289
Assets of disposal group classified as held for sale	20		1,039,888,312,108			—
Current tax assets			2,315,313,716			4,309,671,568
Deferred income tax assets	46		2,427,223,829			1,513,543,375
Deferred acquisition costs	21		1,654,854,101,613			1,606,591,492,707
Other assets	22		48,641,426,413			41,619,439,865
Separate account assets	51		2,722,036,877,851			1,744,168,910,179

Total assets			27,521,333,797,263			23,941,699,499,400

Liabilities
Insurance liabilities	24		20,447,989,539,790			18,484,673,103,264
Financial liabilities at fair value through profit or loss	5,14,25		7,001,616,938			189,667,671,179
Deposits	5,26		—			95,497,317,854
Debts	5,27		—			295,301,754,649
Other financial liabilities	5,28,32		528,311,743,729			553,468,035,646
Derivative liabilities to hedge	5,14		95,336,345,346			63,410,932,856
Provisions	29		47,277,649,541			28,990,896,108
Net defined benefit liabilities	30		103,397,977,900			84,745,578,591
Liabilities of disposal group classified as held for sale	20		884,469,740,813			—
Current tax liabilities			16,705,084,363			—
Deferred tax liabilities	46		245,563,982,782			209,783,762,562
Other liabilities	31		42,238,270,277			35,189,775,251
Separate account liabilities	51		2,991,801,912,071			2,147,385,034,827

Total liabilities			25,410,093,863,550			22,188,113,862,787

Equity
Capital stock	33		30,000,000,000			30,000,000,000
Capital surplus	33		181,120,621,932			49,715,102,618
Capital adjustments	33		(8,508,615	)		(56,607,409,411	)
Accumulated other comprehensive income	33		285,657,046,146			250,316,298,646
Accumulated other comprehensive income of disposal groups	33		1,534,340,393			—
Retained earnings	33		1,582,383,902,252			1,443,753,025,693

Equity attributable to shareholders of the Parent company			2,080,687,402,108			1,717,177,017,546
Non-controlling interests	33		30,552,531,605			36,408,619,067

Total equity			2,111,239,933,713			1,753,585,636,613

Total liabilities and equity			27,521,333,797,263			23,941,699,499,400

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

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Comprehensive Income

Years ended December 31, 2015 and 2014


(In Korean won)	Note		2015			2014
Operating revenue
Premium income		34		9,124,342,819,637			8,837,489,849,738
Reinsurance income		36		682,091,879,383			678,750,827,691
Recovered expenses		41		103,423,710,107			132,714,988,739
Interest income		6,37		615,085,381,934			562,990,094,152
Dividend income		6		65,973,127,494			55,159,041,166
Gain on valuation and disposal of securities		6,38		134,204,797,116			121,995,168,033
Gain on valuation and disposal of loans and other receivables		6,39		164,076,340			3,483,229,068
Gain on valuation and disposal of derivatives		6,14,40		29,673,128,139			40,638,427,183
Gain on valuation and disposal of Investments in subsidiaries				352,557,223			5,099,420,017
Foreign currency transaction gain		6		201,780,246,386			118,106,817,185
Gain on changes in reinsurance assets		15		—			102,306,961,561
Other income		43,44		58,240,200,721			49,847,853,006
Separate account income		51		94,949,906,565			69,914,386,669

				11,110,281,831,045			10,778,497,064,208

Operating expenses
Change in insurance liabilities		24		1,942,098,969,592			2,368,983,693,207
Insurance claims paid		35		3,234,418,113,439			3,015,975,700,933
Refund of surrender value and dividend expenses		35		2,291,491,508,146			2,152,748,056,075
Reinsurance expenses		36		883,531,939,682			941,109,106,025
Loss from reimbursement		22		784,223,510			1,290,725,030
Claim survey expenses paid		42		219,952,379,714			202,621,897,831
Amortization of deferred acquisition costs		21		654,047,419,224			644,567,414,934
Insurance operating expenses		42		953,613,019,902			905,903,523,152
Interest expense		6,37		752,201,426			555,552,097
Loss on valuation and disposal of securities		6,38		93,085,193,255			65,059,684,689
Loss on valuation and disposal of loans and other receivables		6,39		11,633,056,110			4,799,262,685
Loss on valuation and disposal of derivatives		6,14,40		172,321,832,759			101,392,727,183
Loss on investments on subsidiaries and associates				1,004,530,395			—
Foreign currency transaction loss		6		23,039,989,030			22,989,671,578
Administrative expenses for assets		42		78,328,249,647			69,795,437,405
Loss on changes of reinsurance assets		15		130,428,933,316			—
Administrative expenses for real estate		16		16,291,391,710			16,234,568,957
Other expenses		43,44		66,118,983,627			60,976,771,029
Separate account expenses		51		94,949,906,565			69,914,386,669

				10,867,891,841,049			10,644,918,179,479

Operating income				242,389,989,996			133,578,884,729

Non-operating income (expenses)
Non-operating income		45		4,559,041,271			13,877,584,822
Non-operating expenses		45		4,810,924,051			11,331,174,641

				(251,882,780	)		2,546,410,181

Profit before income tax from continuing operations				242,138,107,216			136,125,294,910

Income tax expense from continuing operations		46		53,463,770,378			26,174,236,650

Profit for the year from continuing operations		7		188,674,336,838			109,951,058,260

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Comprehensive Income

Years ended December 31, 2015 and 2014


(In Korean won)	Note	2015			2014
Profit for the year from discontinued operations	7,20		(29,326,171,733	)		(721,746,227	)
Profit for the year	33		159,348,165,105			109,229,312,033
Other comprehensive income	33		36,273,649,061			166,745,769,237
Items that will not be reclassified subsequently to profit or loss
Remeasurements of defined benefit plans	30		2,064,447,572			(9,318,858,299	)
Items that may be subsequently reclassified to profit or loss
Unrealized net change in fair value of available-for-sale financial assets	6		42,530,142,800			162,550,725,025
Effective portion of changes in fair value of cash flow hedges	6		(661,144,807	)		1,001,300,612
Unrealized net change in other comprehensive income of associate			(18,231,841	)		23,734,132
Foreign currency translation differences for foreign operations			(4,196,363,119	)		(1,830,488,828	)
Other comprehensive income arising from separate account			(3,445,201,544	)		14,319,356,595

			36,273,649,061			166,745,769,237

Total comprehensive income for the year			195,621,814,166			275,975,081,270

Profit for the year attributable to :
Shareholders of the Parent Company			164,198,627,698			109,341,984,412
Non-controlling interests			(4,850,462,593	)		(112,672,379	)

			159,348,165,105			109,229,312,033

Total comprehensive income for the year attributable to :
Shareholders of the Parent Company			201,073,715,591			275,252,834,989
Non-controlling interests			(5,451,901,425	)		722,246,281

			195,621,814,166			275,975,081,270

Earnings per share
Basic earnings per share	47		3,117			2,115

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

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Changes in Equity

Years ended December 31, 2015 and 2014


(In Korean won)	Capital stock		Capital surplus		Capital adjustments			Accumulated other comprehensive income			Retained earnings			Non-controlling interests			Total

Balance at January 1, 2014		30,000,000,000		49,715,102,618		(56,601,850,642	)		101,278,962,021			1,343,301,326,599			36,687,540,504			1,502,381,081,100
Total comprehensive income (loss)
Profit (loss) for the year		—		—		—			—			109,341,984,412			(112,672,379	)		109,229,312,033
Net change in fair value of available-for-sale financial assets		—		—		—			161,790,745,167			—			759,979,858			162,550,725,025
Effective portion of changes in fair value of cash flow hedges		—		—		—			1,001,300,612			—			—			1,001,300,612
Net change in fair value of subsidiaries		—		—		—			23,013,428			—			720,704			23,734,132
Foreign currency translation differences for foreign operations		—		—		—			(1,895,854,556	)		—			65,365,728			(1,830,488,828	)
Other comprehensive income arising from separate account		—		—		—			14,319,356,595			—			—			14,319,356,595
Remeasurements of defined benefit plans		—		—		—			(9,327,710,669	)		—			8,852,370			(9,318,858,299	)
Transactions with owners of the Group
Dividends to owners of the Group		—		—		—			—			(25,854,910,500	)		—			(25,854,910,500	)
Others
Transfer of revaluation of property and equipment		—		—		—			(16,873,513,952	)		16,846,334,719			—			(27,179,233	)
Changes in consolidated subsidiaries		—		—		(5,558,769	)		—			118,290,463			998,832,282			1,111,563,976


Balance at December 31, 2014		30,000,000,000		49,715,102,618		(56,607,409,411	)		250,316,298,646			1,443,753,025,693			36,408,619,067			1,753,585,636,613

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Changes in Equity

Years ended December 31, 2015 and 2014


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

Balance at January 1, 2015		30,000,000,000		49,715,102,618		(56,607,409,411	)		250,316,298,646			—		1,443,753,025,693			36,408,619,067			1,753,585,636,613
Total comprehensive income (loss)
Profit (loss) for the year		—		—		—			—			—		164,198,627,698			(4,850,462,593	)		159,348,165,105
Net change in fair value of available-for-sale financial assets		—		—		—			43,007,804,370			—		—			(477,661,570	)		42,530,142,800
Effective portion of changes in fair value of cash flow hedges		—		—		—			(661,144,807	)		—		—			—			(661,144,807	)
Net change in fair value of associates		—		—		—			(18,457,972	)		—		—			226,131			(18,231,841	)
Foreign currency translation differences for foreign operations		—		—		—			(4,070,062,000	)		—		—			(126,301,119	)		(4,196,363,119	)
Other comprehensive income arising from separate account		—		—		—			(3,445,201,544	)		—		—			—			(3,445,201,544	)
Remeasurements of defined benefit plans		—		—		—			2,062,149,846			—		—			2,297,726			2,064,447,572
Classified as held-for-sale		—		—		—			(1,534,340,393	)		1,534,340,393		—			—			—

Transactions with owners of the Group
Dividends to owners of the Group		—		—		—			—			—		(25,854,910,500	)		—			(25,854,910,500	)
Other changes		—		—		—			—			—		287,159,361			(287,159,361	)		—
Disposal of treasury stocks		—		131,405,519,314		56,599,754,316			—			—		—			—			188,005,273,630

Others
Changes in consolidated subsidiaries		—		—		(853,520	)		—			—		—			(117,026,676	)		(117,880,196	)


Balance at December 31, 2015		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

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

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Cash Flows

Years ended December 31, 2015 and 2014


(In Korean won)	2015			2014

Cash flows from operating activities
Profit before income tax		215,726,257,559			135,958,482,177
Adjustments for:
Interest income		(637,396,591,744	)		(583,929,317,614	)
Interest expense		10,086,858,512			10,552,539,555
Dividend income		(66,027,858,554	)		(55,239,989,986	)
Change in reinsurance assets		130,428,933,316			(102,306,961,561	)
Net loss from reimbursement		784,223,510			1,290,725,030
Net gain on valuation and disposal of securities		(40,425,659,533	)		(49,459,177,544	)
Net loss on valuation of loans and other receivables		11,106,366,957			5,395,948,482
Net loss on valuation and disposal of derivatives		143,706,362,201			64,096,531,393
Net gain on Investments in subsidiaries		(1,022,915,412	)		(1,024,759,442	)
Net foreign currency transaction loss gain		(158,268,205,964	)		(95,598,216,075	)
Change in insurance liabilities		1,942,098,969,646			2,368,983,693,207
Amortization of deferred acquisition costs		654,047,419,224			644,567,414,934
Depreciation		41,836,282,157			43,530,582,401
Amortization of intangible assets		10,759,802,915			18,822,511,119
Impairment loss on intangible assets		1,316,607,582			5,112,820,191
Net gain on disposal of assets held for sale		—			(6,867,837,446	)
Impairment loss on asset group held for sale		37,787,910,820			—
Pension expenses		39,065,965,793			30,250,345,331
Other operating loss		16,983,671,700			5,159,285,261

		2,352,594,400,685			2,439,294,619,413

Changes in:
Financial assets at fair value through profit or loss		(365,167,203,487	)		(330,507,021,993	)
Joint compensation fund		(691,220,709	)		276,981,873
Derivative assets to hedge		—			(708,457,000	)
Loans		(487,497,351,002	)		(743,243,123,922	)
Other receivables		262,297,648,460			(190,562,118,581	)
Deferred acquisition costs		(702,310,028,130	)		(639,872,446,974	)
Other assets		(8,452,016,777	)		20,569,651,572
Separate account assets		(982,413,088,442	)		(295,264,097,094	)
Financial liabilities at fair value through profit or loss		69,185,791,533			99,044,953,987
Deposits		27,391,335,699			30,350,141,910
Other financial liabilities		12,740,019,915			18,931,103,162
Derivative liabilities to hedge		2,064,481,756			35,343,675,224
Provisions		(76,041,194	)		(45,100,000	)
Liability for defined benefit plans		(16,552,434,619	)		(35,456,027,895	)
Other liabilities		(3,600,265,919	)		(25,487,227,303	)
Separate account liabilities		844,416,877,244			530,146,091,376
Foreign currency translation differences for foreign operations		5,260,153,391			5,990,845,954

		(1,343,403,342,281	)		(1,520,492,175,704	)

Income tax paid		(56,409,983,778	)		(24,886,535,543	)

Interest received		652,036,118,326			598,246,207,575

Interest paid		(9,853,798,239	)		(10,548,314,239	)

Dividends received		62,766,031,312			58,178,679,686

Net cash inflow from operating activities		1,657,729,426,025			1,539,792,481,188

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Consolidated Statements of Cash Flows

Years ended December 31, 2015 and 2014


(In Korean won)	2015			2014

Cash flows from investing activities
Proceeds from sale of available-for-sale financial assets		2,669,595,101,538			2,198,968,509,640
Acquisitions of available-for-sale financial assets		(3,882,134,610,989	)		(3,517,252,441,942	)
Proceeds from redemption of held-to-maturity financial assets		34,466,033,617			—
Acquisitions of held-to-maturity financial assets		(543,311,900,000	)		(101,568,306,004	)
Proceeds from sale of property and equipment		2,003,074,176			4,236,446,682
Acquisitions of property and equipment		(11,184,290,280	)		(13,016,194,879	)
Proceeds from sale of intangible assets		2,702,930,059			4,295,000,000
Acquisitions of intangible assets		(10,742,463,875	)		(6,467,478,878	)
Proceeds from sale of assets held for sale		—			43,470,333,320
Proceeds from sale of investments in associates and subsidiaries		15,526,569,650			—
Acquisitions of investments in associates and subsidiaries		(20,000,000	)		(10,000,000	)
Decrease in guarantee deposits		8,981,365,754			7,116,900,097
Increase in guarantee deposits		(5,439,645,826	)		(5,845,728,399	)
Cash inflows from hedging activities		6,075,714,987			33,205,146,797
Cash outflows from hedging activities		(98,459,615,177	)		(11,528,546,780	)

Net cash outflow from investing activities		(1,811,941,736,366	)		(1,364,396,360,346	)


Cash flows from financing activities
Dividends paid		(26,036,502,889	)		(25,854,759,180	)
Increase in debts		164,574,542,405			—
Decrease in debts		—			(122,107,622,867	)
Increase in guarantee deposits from lessee		3,858,234,571			2,495,739,451
Decrease in guarantee deposits from lessee		(4,968,853,330	)		(3,035,465,257	)
Cash inflow from changes in ownership interests in subsidiaries		—			1,323,000,000
Cash outflow from changes in ownership interests in subsidiaries		(91,026,000	)		(595,208,900	)
Disposal of treasury stocks		229,958,000,000			—

Net cash inflow (outflow) from financing activities		367,294,353,973			(147,774,316,753	)


Effect of exchange rate fluctuations on cash and cash equivalents		1,178,149,876			271,633,778

Net increase in cash and cash equivalents		214,260,193,508			27,893,437,867
Cash and cash equivalents at beginning of the year		566,224,007,639			538,330,569,772

Cash and cash equivalents at end of the year		780,484,201,147			566,224,007,639

Cash and cash equivalents classified as disposal groups		11,276,274,355			—

Cash and cash equivalents in the consolidated financial position at the end of the year		769,207,926,792			566,224,007,639

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

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

1. The Parent Company

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

(1) Overview of the Parent Company

KB Insurance Co., Ltd (Formerly LIG 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 December 31, 2015, the Parent Company has 60 branch offices and 323 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. (33.29%) as of December 31, 2015.

(2) Overview of the consolidated subsidiaries

Details of ownership interests of the consolidated subsidiaries as of December 31, 2015 and 2014, are as follows:


Subsidiaries	Location	Industry	Date of financial statements	2015						2014
				Owner- ship			Ownership of non- controlling interests			Owner- ship			Ownership of non- controlling interests
Leading Insurance Services, Inc.	USA	Management service	Dec 31		100.00	%		—			100.00	%		—
LIG Insurance (China) Co., Ltd	China	Non-life insurance	Dec 31		100.00	%		—			100.00	%		—
PT. KB Insurance Indonesia (Formerly LIG Insurance Co., Ltd)	Indonesia	Non-life insurance	Dec 31		70.00	%		30.00	%		70.00	%		30.00	%
LIG Investment & Securities Co., Ltd¹	Korea	Financial investment	Dec 31		82.35	%		17.65	%		82.35	%		17.65	%
KB Claims Survey & Adjusting (Formerly LIG Claims & Adjusting Co., Ltd)	Korea	Claim service	Dec 31		100.00	%		—			100.00	%		—
KB Sonbo CNS Co., Ltd (Formerly LIG Tomorrowplus Co., Ltd)	Korea	Management service	Dec 31		100.00	%		—			100.00	%		—

¹ The Group is classified as a disposal group held for sale with approval of the board of directors (Note 20).

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(3)	Overview of the consolidated beneficiary certificates

Details of consolidated beneficiary certificates as of December 31, 2015, are as follows:


Company	Location	Industry	Ownership interests
Company	Location	Industry	2015			2014
KB Smart Stepup Private Fund 2^nd	Korea	Financial investment		0.00	%		100.00	%
KB Smart Stepup Private Fund 3^rd	Korea	Financial investment		100.00	%		100.00	%
KB Smart Stepup Private Fund 4^th	Korea	Financial investment		100.00	%		100.00	%
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	%		100.00	%
Daishin Forte Alpha Private Fund 31^st	Korea	Financial investment		100.00	%		100.00	%
Daishin Forte Alpha Private Fund 32^nd	Korea	Financial investment		100.00	%		100.00	%
Daishin Forte Alpha Private Fund 33^rd	Korea	Financial investment		100.00	%		100.00	%
Daishin Forte Alpha Private Fund 36^th	Korea	Financial investment		100.00	%		100.00	%
Daishin Forte Alpha Private Fund 43^rd	Korea	Financial investment		100.00	%		100.00	%
Daishin Forte Alpha Private Fund 44^th	Korea	Financial investment		100.00	%		100.00	%
Dongbu Private Fund 16^th	Korea	Financial investment		89.52	%		99.96	%
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 Real estate Private Fund 58^th	Korea	Financial investment		99.99	%		99.99	%
Hanwha Private Equity Securities Investment Trust 86^th	Korea	Financial investment		100.00	%		100.00	%
Hyundai Aviation Private Fund 2^nd	Korea	Financial investment		0.00	%		100.00	%
Hyundai Aviation Private Fund 3^rd	Korea	Financial investment		99.96	%		99.95	%
Hyundai Power Private Fund 3^rd	Korea	Financial investment		99.95	%		0.00	%
Shinhan BNPP Private Fund V-12^th	Korea	Financial investment		0.00	%		100.00	%
Pheonix Blue DIP Private Fund 4^th	Korea	Financial investment		0.00	%		100.00	%

(4)	Changes in subsidiaries


Company		Description
Hyundai Power Private Fund 3^rd		Included in the consolidation due to gain of control through a new investment
Shinhan BNPP Private Fund V-12^th		Excluded from the consolidation due to disposal of investment
Pheonix Blue DIP Private Fund 4^th		Excluded from the consolidation due to disposal of investment
Hyundai Aviation Private Fund 2^nd		Excluded from the consolidation due to disposal of investment
KB Smart Stepup Private Fund 2^nd		Excluded from the consolidation due to disposal of investment

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(5)	Summarized financial information of subsidiaries and beneficiary securities

Summarized financial information of subsidiaries and beneficiary securities as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Assets		Liabilities		Equity		Revenue		Profit for the year			Total comprehensive income for the year
Company
Leading Insurance Services, Inc.		4,050		30		4,020		12,572		5			245
LIG Insurance (China) Co., Ltd		106,181		63,394		42,787		84,049		1,488			1,866
PT. KB Insurance Indonesia (Formerly LIG Insurance Co., Ltd)		42,074		29,488		12,586		21,518		847			426
LIG Investment & Securities, Co., Ltd		1,078,510		884,777		193,733		138,008		8,462			5,713
KB Claims Survey & Adjusting (Formerly LIG Claims & Adjusting Co., Ltd)		26,153		15,567		10,586		98,838		2,287			2,254
KB Sonbo CNS Co., Ltd (Formerly LIG Tomorrowplus Co., Ltd)		3,068		2,806		262		32,312		481			481
KB SmartStepUp 3^rd		9,861		42		9,819		795		48			48
KB SmartStepUp 4^th		9,839		23		9,816		1,165		79			79
KB HopePartner 1^st		50,440		5		50,435		2,727		2,114			2,114
Daishin Forte Alpha Private Fund 30^th		10,049		17		10,032		862		621			621
Daishin Forte Alpha Private Fund 31^st		20,157		33		20,124		2,968		1,149			1,149
Daishin Forte Alpha Private Fund 32^nd		10,006		16		9,990		812		566			566
Daishin Forte Alpha Private Fund 33^rd		10,007		16		9,991		926		585			585
Daishin Forte Alpha Private Fund 36^th		9,904		23		9,881		313		(26	)		(26	)
Daishin Forte Alpha Private Fund 43^rd		10,002		27		9,975		694		319			319
Daishin Forte Alpha Private Fund 44^th		10,120		22		10,098		708		409			409
Dongbu Private Fund 16^th		42,361		2,955		39,406		2,308		1,874			1,874
Mirae Asset Triumph Private Fund 38^th		50,178		178		50,000		2,722		2,080			2,080
Shinhan BNPP Private Fund 42^nd		50,003		—		50,003		2,143		2,020			2,020
Hana Landchip Real estate Private Fund 58^th		15,327		1,292		14,035		1,449		558			558
Hanhwa Private Fund 86^th		50,035		2		50,033		2,147		1,944			1,944
Hyundai Aviation Private Fund 3^rd		21,086		1		21,085		2,554		1,327			1,327
Hyundai Power Private Fund 3^rd		23,464		28		23,436		3,740		2,042			2,151

		1,662,875		1,000,742		662,133		416,330		31,279			28,803

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Assets		Liabilities		Equity			Revenue		Profit for the year			Total comprehensive income for the year
Company
Leading Insurance Services, Inc.		4,025		250		3,775			15,009		135			219
LIG Insurance (China) Co., Ltd		141,156		100,236		40,920			36,682		986			1,633
PT. KB Insurance Indonesia (Formerly LIG Insurance Co., Ltd)		44,095		31,936		12,159			12,193		43			260
LIG Investment & Securities, Co., Ltd		801,039		612,927		188,112			108,293		(722	)		3,730
KB Claims Survey & Adjusting (Formerly LIG Claims & Adjusting Co., Ltd)		22,702		14,371		8,331			92,099		(1,240	)		(1,240	)
KB Sonbo CNS Co., Ltd (Formerly LIG Tomorrowplus Co., Ltd)		2,443		2,662		(219	)		30,942		(222	)		(222	)
KB SmartStepUp 2^nd		20,156		354		19,802			1,597		(429	)		(429	)
KB SmartStepUp 3^rd		10,161		151		10,010			1,032		10			10
KB SmartStepUp 4^th		10,146		102		10,044			81		44			44
KB HopePartner 1^st		50,210		2		50,208			226		208			208
Daishin Forte Alpha Private Fund 30^th		10,300		90		10,210			1,699		10			10
Daishin Forte Alpha Private Fund 31^st		20,655		158		20,497			2,693		479			479
Daishin Forte Alpha Private Fund 32^nd		10,217		82		10,135			1,040		149			149
Daishin Forte Alpha Private Fund 33^rd		10,198		86		10,112			1,262		110			110
Daishin Forte Alpha Private Fund 36^th		10,552		215		10,337			728		337			337
Daishin Forte Alpha Private Fund 43^rd		10,404		250		10,154			406		154			154
Daishin Forte Alpha Private Fund 44^th		10,219		255		9,964			281		(36	)		(36	)
Dongbu Private Fund 16^th		27,046		17		27,029			4,343		1,506			1,506
Mirae Asset Triumph Private Fund 38^th		50,201		3		50,198			231		198			198
Shinhan BNPP Private Fund 42^nd		50,217		2		50,215			224		215			215
Shinhan BNPP Private Fund V-12^th		19,872		499		19,373			1,640		(811	)		(811	)
Pheonix Blue DIP Private Fund 4^th		1,168		180		988			673		26			26
Hana Landchip Realestate Private Fund 58^th		10,500		701		9,799			473		136			136
Hanhwa Private Fund 86^th		50,224		3		50,221			231		221			221
Hyundai Aviation Private Fund 2^nd		21,317		11		21,306			1,436		1,487			1,487
Hyundai Aviation Private Fund 3^rd		21,248		40		21,208			2,154		643			643

		1,440,471		765,583		674,888			317,668		3,637			9,037

(6)	Details of non-controlling interests as of December 31, 2015, are as follows:


(In millions of won)	Profit (loss) to non- controlling interests	Accumulated non-controlling interests	Dividends paid to non-controlling interests
PT. KB Insurance Indonesia (Formerly LIG Insurance Indonesia Co., Ltd)	254	3,776	—
LIG Investment & Securities Co., Ltd	(5,104)	26,777	—

	(4,850)	30,553	—

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

2. Significant Accounting Policies

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1 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 have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea.

The preparation of the consolidated interim financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

2.2 Changes in Accounting Policies and Disclosure

(1) New and amended standards adopted by the Group

The Group newly applied the following amended and enacted standards and interpretation for the annual period beginning on January 1, 2015, and this application does not have a material impact on the consolidated financial statements.

- Amendment to Korean IFRS 1019, Employee Benefits

Korean IFRS 1019, Employee Benefits, allows a practical expedient for companies that operate defined benefit plans and when contributions are made by employees or third parties.

- Annual Improvements to Korean IFRS 2010-2012 Cycle

•

Amendment to Korean IFRS 1102, Share-based payment

Korean IFRS 1102, Share-based payment, clarifies the definition of a ‘vesting conditions’, ‘performance condition’, and ‘service condition’.

•

Amendment to Korean IFRS 1103, Business Combination

Korean IFRS 1103, Business Combination, clarifies the classification and measurement of contingent consideration in the business combination.

•

Amendment to Korean IFRS 1108, Operating Segments

Korean IFRS 1108, Operating Segments, requires disclosures of the judgments made by management in aggregating operating segments and a reconciliation of the reportable segments’ assets to the entity’s assets.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

•

Amendment to Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets

Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets, clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model.

•

Amendment to Korean IFRS 1024, Related Party Disclosures

Korean IFRS 1024, Related Party Disclosures, includes, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity (‘the management entity’).

- Annual Improvements to Korean IFRS 2011-2013 Cycle:

•

Amendment to Korean IFRS 1103, Business Combination

Korean IFRS 1103, Business Combination, clarifies that Korean IFRS 1103 does not apply to the accounting for the formation of any joint arrangement.

•

Amendment to Korean IFRS 1113, Fair Value Measurement

Korean IFRS 1113, Fair Value Measurement, clarifies that the portfolio exception, which allows an entity to measure the fair value of a group of financial instruments on a net basis, applies to all contracts (including non-financial contracts) within the scope of Korean IFRS 1039.

•

Amendment to Korean IFRS 1040, Investment property

Korean IFRS 1040, Investment property, clarifies that Korean IFRS 1040 and Korean IFRS 1103 are not mutually exclusive.

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

Certain amended accounting standards and interpretations that have been published that are not mandatory for December 31, 2015 reporting periods and have not been early adopted by the Group are set out below.

The Group does not expect the amendments to have a significant impact on the consolidated financial statements.

- Amendment to Korean IFRS 1001, Presentation of Financial Statements

- Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1041, Agriculture and fishing: Productive plants

- Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets: Amortization based on revenue

- Korean IFRS 1110, Consolidated Financial Statements, Korean IFRS 1028, Investments in Associates and Joint Ventures, and Korean IFRS 1112, Disclosures of Interests in Other Entities: Exemption for consolidation of investee

- Korean IFRS 1111, Joint Agreements

- Annual Improvements to Korean IFRS 2012-2014 Cycle

New standards issued but not effective for the financial year beginning January 1, 2015, and not early adopted are enumerated below.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

- Korean IFRS 1109, Financial Instruments

The new Standard issued in December 2015 regarding financial instruments replaces Korean IFRS 1039, Financial Instruments: Recognition and Measurement. Korean IFRS 1109, Financial Instruments, requires financial assets to be classified and measured on the basis of the holder’s business model and the instrument’s contractual cash flow characteristics. The Standard requires a financial instrument to be classified and measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss, and provides guidance on accounting for related gains and losses. The impairment model is changed into an expected credit loss model, and changes in those expected credit losses are recognized in profit or loss. This amendment has been partially reflected, which is consistent with the risk management of companies for hedge accounting. This amendments will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.Early adoption of only the requirements related to financial liabilities designated at fair value through profit or loss is also permitted. The Group is in the process of determining the effects resulting from the adoption of the new Standard.

- Korean IFRS 1115, Revenue from Contracts with Customers

The new Standard for the recognition of revenue issued in December 2015 will replace Korean IFRS1018, Revenue, Korean IFRS 1011, Construction Contracts, and related Interpretations. Korean IFRS 1115, Revenue from Contracts with Customers, will replace the risk-and-reward model under the current standards and is based on the principle that revenue is recognized when control of goods or services transfer to the customer by applying the five-step process. Key changes to current practices include guidance on separate recognition of distinct goods or services in any bundled arrangement, constraint on recognizing variable consideration, criteria on recognizing revenue over time, and increased disclosures. This amendments will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group is in the process of determining the effects resulting from the adoption of the new Standard.

(3) Other Major Changes

(a) Presentation of Change in Revaluation Surplus

The change in the revaluation surplus on the consolidated statement of comprehensive income for the year ended December 31, 2014, represented the sale of certain assets, and as it was not a reclassification of comprehensive income, consolidated comprehensive income for the prior year increased by ￦16,854 million, and had no impact on the previously reported consolidated profit for the year or consolidated net assets.

(b) Modification of Misstatement on Insurance Liabilities at the U.S Branch

In 2015, an error in the understatement of reserves for outstanding claims on insurance contract liabilities was discovered, and accordingly, the financial statements as of and for the year ended December 31, 2014, were restated to correct the error. As it was impracticable to ascertain the effects of the errors on the previous years’ financial statements, only the latest financial year’s financial statements were corrected.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(c) Adjustments required on the consolidated financial statements for the presentation on the change in revaluation surplus and the correction on the understatement of insurance contract liabilities at the US branch are as follows:

① Consolidated statements of financial position


(In millions of won)	Before Adjustment			Adjustment			After Adjustment
Reinsurance assets		885,578			9,379			894,957
Current income tax assets		659			3,651			4,310
Insurance contract liabilities		18,434,592			50,081			18,484,673
Current income tax liabilities		5,784			(5,784	)		—
Gain (loss) on foreign currency translation differences for foreign operation		(5,880	)		(1,715	)		(7,595	)
Retained earnings		1,473,305			(29,552	)		1,443,753

② Consolidated statements of comprehensive income


(In millions of won)	Before Adjustment			Adjustment			After Adjustment
Operating income		10,769,513			8,984			10,778,497
Operating expenses		10,596,947			47,971			10,644,918
Profit before income tax from continuing operations		175,112			(38,987	)		136,125
Income tax expense from continuing operations		35,609			(9,435	)		26,174
Profit for the year from continuing operations		139,503			(29,552	)		109,951
Foreign currency translation differences for foreign operations		(116	)		(1,714	)		(1,830	)
Profit for the period attributable to shareholders of the Parent Company		138,894			(29,552	)		109,342
Comprehensive income for the period attributable to shareholders of the Parent Company		289,646			(14,393	)		275,253
Earnings per share (in Korean won)		2,686			(571	)		2,115

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.

2.3 Consolidation

The Group prepares the consolidated financial statements in accordance with Korean IFRS 1110, Consolidated Financial Statements.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(1) Subsidiaries

Subsidiaries are companies that are controlled by the Parent Company. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Group and de-consolidated from the date when control is lost.

The Group applies the acquisition method to account for business combinations. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred, fair value of non-controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the fair value of net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss.

Balances of receivables and payables, income and expenses and unrealized gains on transactions within the Group are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(2) Associates

Associates are all entities over which the Group has significant influence, and investments in associates are initially recognized at acquisition cost using the equity method. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. If there is any objective evidence that the investment in the associate is impaired, the Group recognizes the difference between the recoverable amount of the associate and its book value as impairment loss.

(3) Joint Arrangement

A joint arrangement, wherein two or more parties have joint control, is classified as either a joint operation or a joint venture. A joint operator has rights to the assets, and obligations for the liabilities, relating to the joint operation and recognizes the assets, liabilities, revenues and expenses relating to its interest in a joint operation. A joint-venture has rights to the net assets relating to the joint venture and accounts for that investment using the equity method.

2.4 Foreign Currency Translation

(a) Functional and Presentation Currency

Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which it operates (“the functional currency”). The functional currency of the Group is Korean won and the same currency is used on the consolidated financial statements.

(b) Transactions and Balances

Foreign currency transactions are recognized by the functional currency with the exchange rate on the date of transactions or the rate on the valuation date in case of revaluation. Foreign exchange gains and losses resulting from the settlement of such transactions or from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.

The foreign exchange difference from non-monetary financial assets and liabilities are considered as gains or losses from the change in fair value that the difference in equity instrument at fair value through profit or loss is included in profit or loss and the difference of the instruments that are available-for-sale are recognized in other comprehensive income.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

If the functional currencies of the foreign operations are different from the Group’s reporting currency, financial performance and financial position are translated by the following method. Unless the functional currency of the foreign operations is the currency under hyper-inflated economy, the assets and liabilities in the consolidated financial statements (including comparative consolidated financial statements) are translated at the closing rate at the end of the reporting period. Average exchange rate during the reporting period is applied on the revenues and expenses on the consolidated statements of comprehensive income including comparative consolidated statements of comprehensive income and the foreign exchange differences from the translation are recognized as other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation shall be treated as assets and liabilities of the foreign operation. Thus they shall be expressed in the functional currency of the foreign operation and shall be translated in Korean won at the closing rate

On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, are reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is recognized. On the partial disposal of a foreign operation, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

2.5 Cash and Cash Equivalents

The Group classifies investment as cash equivalents only when it has a short maturity of, say, three months or less from the date of acquisition. Equity investments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date.

2.6 Financial Assets

(a) Recognition and Classification

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, loans and receivables, and held-to-maturity financial assets. Regular way purchases and sales of financial assets are recognized on trade date.

Without separating embedded derivatives from host contracts, the Group designates the hybrid instruments as an item that is recognized at fair value through profit or loss. The financial assets that are accounted as above are foreign currency convertible bonds and derivatives-linked securities.

When a financial asset is recognized initially, the Group measures it at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. After initial recognition, available-for-sale financial assets and financial assets at fair value through profit or loss are measured at their fair values. Loans and receivables and held-to-maturity financial assets are measured at amortized cost using the effective interest method.

A gain or loss arising from a change in the fair value of a financial asset at fair value through profit or loss is recognized in profit or loss. A gain or loss on an available-for-sale financial asset is recognized in other comprehensive income, until the financial asset is derecognized or impaired. At that time, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(b) Impairment

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets are impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred, if and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The objective evidence of the impairments includes significant financial difficulty of the issuer or obligor and more than six-month overdue of principal or interest payment. . A significant (30%) or prolonged (6 months) decline in the fair value of an available-for-sale equity instrument below its cost is also objective evidence of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured and recognized in profit or loss through other operating income and expenses.

- Loans and Receivables

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant (individual assessment of impairment) and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment (collective assessment of impairment).

Individual assessment of impairment

Individual assessment of impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held.

Collective assessment of impairment

A methodology based on historical loss experience is used to estimate incurred loss on group of assets for collective assessment of impairment. Such methodology incorporates factors such as type of loans and borrowers, credit rating, size of portfolios, loss emergence period, recovery period and applies probability of incurred default on an individual or group of assets, nominal recovery rate of collaterals and loans and loss given default by type of recovery method. Also, historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Impairment loss on loans reduces the carrying amount of the asset through use of an allowance account, and when a loan becomes uncollectable, it is written off against the related allowance account. If, loans and receivables that are previously written off are subsequently collected, the amount of allowance increases, and the adjustment is recognized in profit or loss.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

- Available-for-sale financial assets

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss (the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) that had been recognized in other comprehensive income is reclassified from equity to profit or loss as part of other operating income and expenses.

If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss. However, impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss.

- Held-to-maturity financial assets

If there is objective evidence that an impairment loss on held-to-maturity financial assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss on held-to-maturity financial assets is directly deducted from the carrying amount.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. The amount of the reversal is recognized in profit or loss.

If the Group transfers a financial asset, but retains substantially all the risks and rewards of ownership of the financial asset for example due to a right of recourse in the event of debtor’s defaults, the Group continues to recognize the transferred asset in its entirety and recognize a financial liability for the consideration received.

(d) Offsetting

A financial asset and a financial liability are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. The legally enforceable right to setoff is not contingent upon future events and is enforceable under any circumstances – under the normal course of business, the event of default or the event of solvency or bankruptcy.

2.7 Derivatives

All derivative financial instruments are measured at fair value. Gains or losses arising from a change in fair value are recognized as follows.

(a) Derivatives for hedge

The Group enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. It designates certain derivatives as hedging instruments to hedge the risk of changes in fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge) and the risk of changes in cash flow of highly probable forecast transactions and the currency exchange risk at firm commitment (cash flow hedge).

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

- Fair value hedge

If derivatives qualify for the fair value hedge, the gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss. Fair value change of hedging instruments and underlying assets (hedged instruments) are recognized under the same account in the consolidated statement of comprehensive incomes that the hedged instruments are included. Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged instrument is being amortized and recognized in profit or loss.

-Cash flow hedge

If derivatives are designated as a hedging instrument and is qualified for the cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in other comprehensive income and the ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. In this case, the cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income remains separately in equity until the forecast transaction occurs. However, if he forecast transaction is no longer expected to occur, in which case any related cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.

(b) Embedded derivatives

An embedded derivative is separated from the host contract and accounted for as a derivative under these three conditions, if, and only if the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and the hybrid (combined) instrument is not measured at fair value with changes in fair value recognized in profit or loss. The gain or loss from remeasuring an embedded derivative separated from the host contract is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.

All derivatives but the ones designated as hedging instruments are measured at fair value. The gains or loss from remeasuring other derivatives is recognized in profit or loss.

2.8 Non-current Assets Held-for-sale

Non-current assets (or disposal group) are classified as assets held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. The assets are measured at the lower of their carrying amount and fair value less costs to sell.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

2.9 Property and Equipment

Property and equipment is carried at its cost less any accumulated depreciation and any accumulated impairment losses. The historical cost includes any costs directly attributable to the acquisition of the property. Land is not depreciated whereas other property and equipment are depreciated over their estimated useful lives using the straight-line method. The depreciable amount of the assets is acquisition costs less residual values.

The estimated useful lives of the assets are as follows:


		Estimated useful lives
Buildings		20 ~ 40 years
Other properties and equipment		5 ~ 15 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed at each financial year-end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.

2.10 Government Grants

Government grants are recognized at fair value if, and only if there is a reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received. Government grants related to assets are deducted when the carrying value of the assets are calculated. Government grants related to income are deferred and deducted in reporting the related expense.

2.11 Intangible Assets

Goodwill is measured using the method elaborated in note 2.3(1) and subsequently carried at their cost less and any accumulated impairment losses. Intangible assets, except for goodwill are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.

Internally developed software is sum of the expenditures incurred from the date when conditions of asset recognition is satisfied which include technical feasibility and future economic benefits. As it has indefinite useful life, membership is not amortized. The intangible assets with a finite useful life are amortized with straight-line method.


		Estimated useful lives
Software		5 years
R&D Costs		5 years

2.12 Investment Properties

Properties held to earn rentals or for capital appreciation are classified as investment properties. The properties are measured initially at their cost and carried at the cost less any accumulated depreciation and any accumulated impairment losses. The investment properties except for land is depreciated over their estimated useful life, 20 ~ 40 years using the straight-line method.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

2.13 Impairment of non-financial assets

Goodwill or the intangible assets with indefinite useful lives are tested for impairment at least annually. Other assets are tested for impairment when there is any indication that an asset may be impaired. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount which is the higher of its fair value less costs of disposal and its value in use. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, a reversal of an impairment loss for an asset other than goodwill is recognized in profit or loss.

2.14 Financial Liabilities

(a) Classification and measurement

The Group’s financial liabilities at fair value through profit or loss are financial liabilities held for trading. Financial liabilities incurred principally for the purpose of repurchasing in the near term is classified as the trading liabilities. In addition, derivatives which are not designated for hedging or the ones separated from financial instruments are classified as financial liabilities at fair value through profit or loss.

The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and presents as ‘other financial liabilities’ in the consolidated statement of financial position.

(b) Derecognition

Financial liabilities are derecognized from the consolidated statement of financial position when the obligation specified in the contract is discharged, canceled or expired or when the terms of an existing financial liability are substantially modified.

2.15 Provisions

Provisions are measured at present value of the best estimate of the expenditure required to settle the present obligation. Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognized as interest expense.

2.16 Current and Deferred Tax

The tax expense for the period consists of current and deferred tax. Tax is recognized and included in profit or loss for the period in the statement of income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The tax expense is measured based on the tax laws that have been enacted or substantively enacted by the end of the reporting period.

Management periodically evaluates tax policies that are applied in tax returns to reflect changes in tax interpretation by the taxation authorities. The Group measures current income tax at the amount expected to be paid to the taxation authorities.

Deferred tax is recognized for temporary differences which is the differences between the carrying amount of an asset or liability and its tax base. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects to recover or settle the carrying amount of its assets and liabilities. However, deferred tax assets and liabilities are not recognized if they arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit or loss nor taxable profit or loss. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint arrangements, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, deferred tax asset is recognized for deductible temporary differences arising from such investments to the extent that, and only to the extent that, it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets and liabilities are offset if, and only if the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

2.17 Employee Compensation and Benefits

(a) Post-employment benefits

The Group has both defined contribution and defined benefit plans. A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity. The contributions are recognized as employee benefit expense when an employee has rendered service.

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Typically defined benefit plans define an amount of post-employment benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the consolidated statement of financial position in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds whose term is consistent with the estimated term of the post-employment obligation. The remeasurements of the net defined benefit liability are recognized in other comprehensive income.

If any plan amendments, curtailments, or settlements occur, past service costs or any gains or losses on settlement are recognized as profit or loss.

(b) Share-based payments

Equity-settled share-based payments granted to employees are estimated at the grant date fair value of equity instruments and recognized as employee benefit expenses over the vesting period. The number of equity instruments expected to vest is remeasured with consideration to non-market vesting conditions at the end of the reporting period, with any changes from the original measurement recognized in the profit for the year and equity.

When the options are exercised, the Group issues new shares. The proceeds received, net of any directly attributable transaction costs, are recognized as share capital (nominal value) and share.

2.18 Revenue and Expense Recognition

The Group recognizes revenue when the amounts can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group and specific requirements on the activities of the Group as below are satisfied. Estimates are based on historical experience such as types of clients and transactions and terms of transactions.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(a) Premium income

It is on insurance fee collection dates when the insurance revenue is recognized. However, insurance policies whose initial payments or full payment (single premium policies) have not been made because of deferral of the premium payment are recognized as revenue on the financial year that their inception dates are in. The premiums that are received but its collection date has not come, are accounted as premium in suspense.

(b) Interest revenue and expense

Interest income and expense are recognized using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability, and of allocating the interest income or interest expense over the relevant period. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instruments, the Group uses the contractual cash flows over the full contractual term of the financial instrument. Interest on impaired financial assets is recognized using the interest rate used to discount the future cash flows for the purpose of measuring the impairment loss.

Dividend income is recognized in profit or loss when the Group’s right to receive payment is established.

2.19 Leases

A lease is an agreement, whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases where all the risks and rewards of ownership are not transferred to the Group, as the lessee, are classified as operating leases. Lease payments under operating leases are recognized as expenses on a straight-line basis over the lease term.

Leases where the Group, as the lessee, has substantially all the risks and rewards of ownership are classified as finance leases and recognized as lease assets and liabilities at the lower of the fair value of the leased property and the present value of the minimum lease payments each determined at the inception of the lease.

When the Group is the lessor, a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception of the lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging an operating lease is added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income.

2.20 Insurance Contracts

The Group recognizes a contract as an insurance contract if the contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.

The Group assesses insurance risk of an insurance product using a representative contract. The claims paid when the insured event is occurred and the benefit paid when the insured event is not occurred is considered. If a contract is exposed to financial risk without significant insurance risk, the contract is classified as an investment contract. A contract that initially qualified as an insurance contract remains to be classified as an insurance contract until all rights and obligations are extinguished or expired.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

The Group applies Korean IFRS 1104 ‘Insurance Contracts’ for investment contracts with discretionary participation features. Investment contracts with no discretionary participation features follow Korean IFRS 1039 ‘Financial Instruments: Recognition and Measurement’.

2.21 Insurance Liabilities

In accordance with the Regulation on Supervision of Insurance Businesses (RSIB), the Group is required to maintain policy reserves for insurance claims and policyholders’ dividends, as determined by the RSIB.

(a) Long-term insurance premium reserve

The Group maintains reserves for the portions of premiums (and investment income on such portions), which are refundable to policyholders upon maturity and amounts refundable for policy cancelations under long-term deposit-type insurance.

(b) Reserve for outstanding claims

The reserve for outstanding claims is based on the accumulation of estimated losses reported (estimated losses for claims, cash surrender values or policyholders’ dividends, which are in dispute or in litigation, and estimated losses for claims fixed but not settled) and IBNR (incurred but not reported) prior to the end of the reporting period incurred from the direct business written by the Group and estimated losses received from ceding companies.

The Group is required to maintain an unearned premium reserve at amounts determined based on lines of insurance and types of policies.

(d) Reserve for participating policyholders’ dividends

The Group is required to maintain a reserve for participating policyholders’ dividends under regulations approved by the Ministry of Strategy and Finance.

(e) Excess participating policyholder dividend reserve

Pursuant to relevant laws and contracts, the Group may provide an excess participating policyholder dividend reserve in accordance with the operating results of related insurance products. The reserve may be used to pay participating policyholder dividends or additional dividends.

(f) Reserve for compensation for losses on dividend-paying insurance contracts

The Group maintains a reserve for compensation for losses on dividend-paying insurance contracts by accumulating a part of policyholders’ shares of profits from the dividend-paying insurance contracts within the limit determined by the Financial Services Commission.

2.22 Insurance Liability Adequacy Test

The Group assesses whether its recognized insurance liabilities are adequate in regard to all contracts that apply Korean IFRS 1104. The test considers current estimates of all contractual cash flows, and of related cash flows such as claims handling costs, as well as cash flows resulting from embedded options and guarantees. If the test shows that the liability is inadequate, the Group increases the carrying amount of the relevant insurance liabilities by adding the exact amount of the entire deficiency.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

When assessing the adequacy of long-term insurance liabilities, estimated future cash flows are discounted at future investment margins and, in case of general and automobile insurance, no discount is applied. For the premiums reserve and unearned premiums reserves, a liability adequacy test considers possible claims in the future, insurance operating expenses, operating premiums and other future cash flows. For claim reserves, a liability adequacy test considers the trend of claims payment to assess the adequacy of individual estimated claims.

2.23 Claims handling expenses

Claims handling expenses are costs related to the processing and payment of accidents covered by insurance. At the end of each reporting period, based on contracts with reasons for payment, such as claims, amount expected to arise in the future is earned as claims adjustment reserves (included in reserve for outstanding claims).

2.24 Compensation receivables

Of the amounts paid for claims during the year, amounts recoverable by exercising compensation and other rights or through disposal of secured assets acquired in the resolution of accidents are accounted for as compensation receivables and deducted directly from insurance reserves in the accompanying consolidated statements of financial position. Compensation receivables are calculated by multiplying the average recovery rate (recovery amount/net claims) for the three years before the end of the reporting period and the amount of net claims for the period of one year prior to the end of the reporting period.

2.25 Embedded options and guarantees

A certain insurance contracts include embedded options and guarantees such as minimum guarantees. The Group considers those options and guarantees in the liability adequacy test.

2.26 Discretionary participating features

The Group does not recognize the guaranteed element separately from the discretionary participation feature of insurance and investment contracts. It classifies the whole contract as a liability, applying the liability adequacy test.

2.27 Deferred acquisition costs

Acquisition costs arising from personal pension insurances contracts and long-duration contracts that are made after October 1, 2003 are deferred and evenly amortized over the term of premium payment. When the premium payment period is more than seven years, the acquisition cost is deferred and evenly amortized over seven years. In case of cancelation, unamortized balance is entirely amortized during the fiscal year it was canceled (on the day lapsed when the insurance contract has been lapsed before the cancelation).

2.28 Reinsurance contracts

The Group does not offset the following:

- Reinsurance assets against the related insurance liabilities

- Income or expense from reinsurance contracts against the expense or income from the related insurance contracts

If reinsurance assets are impaired, the Group reduces their carrying amounts accordingly and recognizes that impairment loss in profit or loss.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

2.29 Separate account

In accordance with Article 108 of the Insurance Business Act and the Regulation on Supervision of Insurance Businesses, the Group is required to maintain separate accounts on the statements of financial position for the assets and liabilities related to corporate pension policies from the other insurance policies. Assets and liabilities separately administered from the general account in the asset management and income distribution are deemed assets and liabilities in segmented reporting. These accounts are presented together as separate account assets (liabilities) in the statements of financial position. Outstanding balance incurred in the transactions between the general and separate accounts are substituted from separate account assets and liabilities, respectively.

In accordance with the Regulation on Supervision of Insurance Business, the Group recognizes income and expenses of principal and interest guarantee type separate accounts (retirement insurance and retirement pension) as separate account income and separate account expenses, respectively.

Operating losses incurred from separate accounts are recovered by charging the dividend reserves for policyholders’ income and any remaining unrecovered loss is charged to shareholders’ equity.

2.30 Emergency risk reserve

In order to prevent the Group from a huge loss due to extraordinary risk, an amount not less than 35% and not more than 100% of the amount multiplied by standard rates of accumulation and earned premium for general and automobile insurance is accumulated in retained earnings as an emergency risk reserve by types of insurance until reaching the greater of 50% of earned premiums (automobile – 40%, guarantee – 150%) of the current or the previous financial year.

In addition, where an earned risk loss rate (referring to the ratio dividing the amount of loss incurred by earned risk premium) by types of insurance exceeds a certain ratio (fire - 120%, marine automobile casualty - 110%, guarantee - 140%, reinsurance assumed and overseas direct insurance - 80%) and insurance operating losses are incurred, emergency risk reserves are transferred to unappropriated retained earnings within the extent of such exceeding amount. Meanwhile, when the Group accumulates emergency risk reserves, it applies rates limited between 35% and 100% in consideration of an earned risk loss rate.

2.31 Regulatory reserve for credit loss

Where the accumulated amount of allowances for loan losses and allowances for other receivables losses at the end of the reporting period (including a quarterly closing) is less than amounts required by the Financial Supervisory Service (the “FSS”), the Group accumulates such balance as a regulatory reserve for credit loss. When there is an unappropriated deficit, the reserve is accumulated from the time when the unappropriated deficit is appropriated, and where the existing reserve accumulated exceeds the reserve that should be accumulated at the end of the period, such exceeding amount may be reversed.

2.32 Operating Segments

The Group, in order to decide how to allocate resources and to assess performance, divide operating segments based on the internal information which is evaluated regularly by the directors including the chief operating decision maker. Segment information reported to the CEO includes items which are directly attributable and reasonably allocated to the segment. Non-attributable segments are common assets as headquarters building, expenses related to headquarters and income tax assets and liabilities. The chief operating decision maker is responsible for evaluating attributed resources to the segments and the result of the segments, and for operating strategical decision making.

2.33 Approval of Issuance of the Financial Statements

The issuance of the Group’s consolidated financial statements as of and for the year ended December 31, 2015 was approved by the Board of Directors on February 3, 2016, which is subject to change with approval of shareholders at the annual shareholders’ meeting.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

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 result. The assumptions and estimations that may affect asset and liability adjustments on the next financial year are as follows.

(a) Impairment loss of goodwill

The recoverable amounts of cash-generating units have been determined based on value-in-use calculations to test whether goodwill has suffered any impairment.

(b) Income tax expenses

Income tax expenses are determined by tax code of various countries and the interpretation of taxation authorities, so it is uncertain to figure out exact tax effects.

By the reflux taxes on corporate undistributed profits, for three years from 2015, if the Group does not spend certain amount of its taxable incomes as designated, such as on investment, salary increase and dividends etc., more income tax would be imposed. Therefore, it is needed to reflect the reflux tax effects in calculating current income tax expenses and deferred tax expenses. Because of the complexity to figure out each year’s investment, salary increase and dividends, the income tax expenses for those three years are more likely to be uncertain.

In principles, fair values of financial instruments that does not have active markets are determined by valuation models. The Group choose an appropriate model and evaluate assumptions used at the end of each reporting period.

(d) Liability for defined benefit plans

Present value of liability for defined benefit plans is influenced by various factors, especially discount rate used by actuarial method.

4. Financial risk management

4-1. Overview of risk management

(1) Risk management policy and strategy

The financial risks that the Group is exposed to are insurance risk, market risk, credit risk, liquidity risk and others. The Group, in order to counteract efficiently, in fast-changing financial environment, against inner and outer risk factors, manages risks under the limit through recognizing and measuring numeral risks immediately and accurately. The Group also manages to maximize profit compared to risks. In cases of developing insurance instruments and takeovers, the Group establishes strategies in consideration of risks and manages the assets and liabilities in order to maximize the value of the Group through the most adequate financial structures. Moreover, the Group establishes and manages combined risk limit to manage the risks of the Group to be maintained in adequate level in accordance with the available assets of the Group, to prevent holding too many risks. The Group also monitors risks regularly through measurement and ranks, in need of recognizing and measuring risks accurately, and establishes and exercises adequate reactions when needed.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(2) Risk management process

Risk management procedures of the Group are as follows:

- Risk Identification: The Group analyzes the major process of business operation and identifies possible risks. Financial risk, especially, is divided into insurance risk, interest risk, credit risk, liquidity risk and market risk and is considered as major risk.

- Risk measuring: The Group quantifies and measures the amount of insurance risk, interest risk, credit risk and market risk.

- Risk monitoring and controlling: In order to control total risk under available assets, the Group establishes adequate risk limit and monitors whether the limit is excessed. Moreover, the Group establishes and operates pre- and post-management system for major decisions.

- Risk reporting: The Group regularly reports the outcome of the monitoring of risk factors and the treatment to the Risk Management Committee and management.

(3)	Evaluation of internal capital adequacy and its management procedure

The Group manages its internal capital adequacy with an internal model and standard model. Market risk measurement system (on 2002), interest risk measurement system (on 2004) and credit risk and insurance risk measurement system (on 2005) was established. By the reestablishment of market/credit risk measurement (on 2013), and interest risk measurement system (on 2014), the internal model is sophisticated. The risk of internal model is always monitored and risk of the Group is managed with the maximum loss criteria (Reliability 99%, Credit risk 99.5%). Also, to maintain an appropriate solvency margin, the Group manages risk limits that are calculated using the RBC method and approved by the Risk Management Committee and the trial test of risk limit management by the internal model has been in use since late 2013. Through all these process, even though unexpected loss occurs, the management process of solvency margin is reinforced to be maintained at a certain level.

(4) Board of Directors (Risk Management Committee) and structure and function of risk management organization

The Risk Management Committee makes decisions in regard to risk management and is consisted of five members including three of independent directors. Regular meetings are held quarterly and if necessary, temporary meetings are held. According to the risk management committee rules, the main contents of approval and reporting are as follows:

i) Resolutions

- Basic policy and strategy of risk management that coincides with the management strategies

- Decision on the level of risk that insurers can handle

- Approval of adequate investment and loss limit

- Establishment and revision of risk management criteria (such as risk management regulations)

ii) Deliberations

- New or additional homogeneous investment that exceeds 1% equity of recent financial year

- Homogeneous investment on non-public company’s share that exceeds 1% equity of recent financial year

- Funding to establish a subsidiary

iii) Reporting

- Entire risk status and measures

- Insurance product and investment product that include newly established risks

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

- Analysis in cases of crisis

- Advance and evacuation of business

The Risk Management Council is established in order to exercise the operation of risk management policy that is decided by the Risk Management Committee. Moreover, as an organization that practically supports the Risk Management Committee and the Risk Management Council, the risk management department, known as ‘Risk Management Team’, is independently operating on its own and carries out the following roles.

- Supervision of risk management such as calculation and distribution of assets at risk and management of limits

- Operating detailed policies, procedure and work process of risk management

- Report main points of risk management to the Risk Management Committee, Risk Management Council and the Group management

- Development and operation of adequate system to manage risk

- Development and operation of risk management system

(5) Activities for establishing risk management framework

In order to follow the process of risk identification, measuring, monitoring, controlling and reporting, the Group establishes risk management system, prepares ‘risk management regulation’ and ‘Enforcement rule of risk management regulation’ and operates Investment Review Board, Credit Review Committee, General Insurance Product Acceptance Committee, Long-term Product Committee and other committees in order to manage risk associated with important decision making. The risks that the Group has to manage are classified according to the division in which they occur; into insurance risk, asset management risk, ALM risk and operational risk and are differentiated as follows:

- Insurance risk: insurance price risk, reserves risk

- ALM risk: interest rate risk, liquidity risk

- Asset management risk: market risk, credit risk

- Operational risk: strategy, law, computing, reputation, fraud and other office related risks

In order to measure individual risk, the Group calculates market risks, credit risk, interest rate risk and insurance risks using RBC method on a quarterly basis. By comparing the result of risk measurement in the system with limit and monitoring the result, when the result exceeds the limit, the measured risks are reduced within a certain deadline by the amount the result exceeding the limit. In addition, after monitoring the status of the risk, the result is reported to the Risk Management Committee and if necessary, countermeasures are established and carried out.

4-2. Insurance risk

(1) Overview

Insurance risk is the risk that arises from a primary operation of insurance companies that is associated with acceptance of insurance contract and payment of claims, and is classified as the insurance price risk and the reserves risk. The insurance price risk is the risk of loss that might occur when the actual risk exceeds the expected risk rate or expected insurance operating expenses ratios in calculation of premiums. It is the risk of loss that arises from differences between actual payment of claims and premiums received from policyholders. The reserves risk is the risk that arises due to a deficit in reserves at the date of assessment, making the Group unable to cover the actual claims payment in the future.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(2) Purposes, policies and procedures to manage risk arising from insurance contracts

The risks associated with insurance contract that the Group faces are the insurance actuarial risk and the acceptance risk. Each risk occurs due to insurance contract’s pricing and conditions of acceptance. In order to minimize acceptance risk, the Group establishes guidelines and procedure for acceptance and out lines specific conditions for acceptance by product. In addition, expected risk level at the date of pricing is compared with actual risk of contracts after acceptance and the interest rate is adjusted accordingly, conditions of sale is changed, sale of goods is interrupted and other measures are taken in order to reduce insurance actuarial risk. The Group has a committee to discuss status of product acceptance risk and interest rate policy. The committee decides important matters to set the processes that allow minimizing the insurance actuarial risk, the acceptance risk and other business related risk.

In addition, according to reinsurance operating standards, the Group establishes an operating strategy of reinsurance for large claims expense due to unexpected catastrophic events. The Group supports so that policyholders are safe and the Group’s stable profit can be achieved. For the long-term goal, the Group manages risk at a comprehensive level to keep its value at the maximum

The Group’s entire risk is calculated by using RBC method. The Group sets the risk appetite limits in order that the calculated risk level is maintained at an appropriate level compared to available capital. Portfolio of assets and products are monitored to improve profit compared to risk.

(3) Exposure to insurance price risk

According to RBC standard, exposure to insurance price risk is defined as net written premiums for prior 1 year that is calculated by adding and subtracting original insurance premium, assumed reinsurance premium and ceded reinsurance premium.

The Group’s exposure to insurance price risk as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Direct insurance		Inward reinsurance		Outward reinsurance			Total
General		860,063		77,439		(621,670	)		315,832
Automobile		1,745,486		—		(40,462	)		1,705,024
Long-term		1,572,534		—		(191,140	)		1,381,394

		4,178,083		77,439		(853,272	)		3,402,250


	2014
(In millions of won)	Direct insurance		Inward reinsurance		Outward Reinsurance			Total
General		899,326		67,332		(657,605	)		309,053
Automobile		1,635,558		—		(81,715	)		1,553,843
Long-term		1,360,104		—		(169,027	)		1,191,077

		3,894,988		67,332		(908,347	)		3,053,973

(4) Concentration of Insurance risk

The Group is selling general non-life insurances (fire, maritime, injury, technology, liability, package, title, guarantee and special type insurances), automobile insurances (for private use, for hire, for business, bicycle and other), long-term insurances (long-term non-life, property damage, injury, driver, savings, illness, nursing and pension) and various other insurances. The Group’s risk is distributed through reinsurance, joint acceptance and diversified selling. In addition, insurances that cover serious damage of risk, although with rare possibility of the occurrence of disaster, such as storm and flood insurance are limited, and the Group controls the risk through joint acquisition.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(5) Loss development tables

The Group uses claim development of payments and the estimated ultimate claims for the accident years in order to maintain overall reserve adequacy in respect of general, automobile and long-term insurance. When the estimated ultimate claims are greater than claim payments, the Group establishes additional reserves. Loss development tables as of December 31, 2015, are as follows:

i) General Insurance


(In millions of won)	Payment year
Accident year	After 1 year		After 2 years		After 3 years		After 4 years		After 5 years
Estimate of gross ultimate claims (A)
2011.1.1 ~ 2011.12.31		129,224		154,398		159,960		161,694		162,623
2012.1.1 ~ 2012.12.31		137,072		166,294		170,767		173,276		—
2013.1.1 ~ 2013.12.31		161,506		191,911		196,768		—		—
2014.1.1 ~ 2014.12.31		111,644		128,464		—		—		—
2015.1.1 ~ 2015.12.31		116,872		—		—		—		—

		656,318		641,067		527,495		334,970		162,623

Gross cumulative claim payments (B)
2011.1.1 ~ 2011.12.31		97,490		140,620		152,696		157,622		160,074
2012.1.1 ~ 2012.12.31		101,938		154,844		163,211		167,864		—
2013.1.1 ~ 2013.12.31		124,607		172,880		186,554		—		—
2014.1.1 ~ 2014.12.31		83,076		115,302		—		—		—
2015.1.1 ~ 2015.12.31		87,851		—		—		—		—

		494,962		583,646		502,461		325,486		160,074

Difference (A-B)		161,356		57,421		25,034		9,484		2,549

ii) Automobile Insurance


(In millions of won)	Payment year
Accident year	After 1 year		After 2 years		After 3 years		After 4 years		After 5 years		After 6 years		After 7 years
Estimate of gross ultimate claims (A)
2009.1.1 ~ 2009.12.31		790,947		806,669		810,734		813,601		813,827		813,355		813,357
2010.1.1 ~ 2010.12.31		993,509		1,012,484		1,018,097		1,022,687		1,022,856		1,023,197		—
2011.1.1 ~ 2011.12.31		1,088,801		1,105,501		1,115,281		1,119,872		1,122,637		—		—
2012.1.1 ~ 2012.12.31		1,117,650		1,146,779		1,155,529		1,162,075		—		—		—
2013.1.1 ~ 2013.12.31		1,131,945		1,156,535		1,170,968		—		—		—		—
2014.1.1 ~ 2014.12.31		1,174,611		1,193,832		—		—		—		—		—
2015.1.1 ~ 2015.12.31		1,227,106		—		—		—		—		—		—

		7,524,569		6,421,800		5,270,609		4,118,235		2,959,320		1,836,552		813,357

Gross cumulative claim payments(B)
2009.1.1 ~ 2009.12.31		662,783		779,730		797,039		804,149		808,954		810,711		812,359
2010.1.1 ~ 2010.12.31		850,192		981,338		1,004,341		1,012,469		1,018,391		1,020,229		—
2011.1.1 ~ 2011.12.31		929,491		1,066,885		1,093,589		1,109,202		1,117,381		—		—
2012.1.1 ~ 2012.12.31		939,239		1,105,672		1,135,064		1,149,585		—		—		—
2013.1.1 ~ 2013.12.31		939,569		1,114,063		1,145,110		—		—		—		—
2014.1.1 ~ 2014.12.31		969,211		1,150,462		—		—		—		—		—
2015.1.1 ~ 2015.12.31		1,020,975		—		—		—		—		—		—

		6,311,460		6,198,150		5,175,143		4,075,405		2,944,726		1,830,940		812,359

Difference (A-B)		1,213,109		223,650		95,466		42,830		14,594		5,612		998

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

iii) Long-term Insurance


(In millions of won)	Payment year
Accident year	After 1 year		After 2 years		After 3 years		After 4 years		After 5 years
Estimate of gross ultimate claims (A)
2011.1.1 ~ 2011.12.31		574,869		779,908		807,510		815,315		819,250
2012.1.1 ~ 2012.12.31		634,920		885,789		921,919		933,320		—
2013.1.1 ~ 2013.12.31		717,558		1,003,441		1,046,675		—		—
2014.1.1 ~ 2014.12.31		797,967		1,125,417		—		—		—
2015.1.1 ~ 2015.12.31		897,267		—		—		—		—

		3,622,581		3,794,555		2,776,104		1,748,635		819,250

Gross cumulative claim payments (B)
2011.1.1 ~ 2011.12.31		544,181		741,333		764,853		769,759		771,762
2012.1.1 ~ 2012.12.31		597,083		836,335		865,333		873,028		—
2013.1.1 ~ 2013.12.31		679,394		953,234		988,820		—		—
2014.1.1 ~ 2014.12.31		753,756		1,064,064		—		—		—
2015.1.1 ~ 2015.12.31		848,147		—		—		—		—

		3,422,561		3,594,966		2,619,006		1,642,787		771,762
Difference (A-B)		200,020		199,589		157,098		105,848		47,488

Loss development tables as of December 31, 2014, are as follows:

i) General Insurance


(In millions of won)	Payment year
Accident year	After 1 year		After 2 years		After 3 years		After 4 years		After 5 years
Estimate of gross ultimate claims (A)
2010.1.1 ~ 2010.12.31		118,631		142,385		145,546		147,067		147,363
2011.1.1 ~ 2011.12.31		125,814		150,955		156,302		158,036		—
2012.1.1 ~ 2012.12.31		136,574		165,784		170,755		—		—
2013.1.1 ~ 2013.12.31		156,616		186,753		—		—		—
2014.1.1 ~ 2014.12.31		109,494		—		—		—		—

		647,129		645,877		472,603		305,103		147,363

Gross cumulative claim payments (B)
2010.1.1 ~ 2010.12.31		89,885		128,278		137,782		141,702		144,692
2011.1.1 ~ 2011.12.31		94,637		137,176		149,046		153,972		—
2012.1.1 ~ 2012.12.31		101,905		154,161		162,966		—		—
2013.1.1 ~ 2013.12.31		122,153		168,088		—		—		—
2014.1.1 ~ 2014.12.31		81,188		—		—		—		—

		489,768		587,703		449,794		295,674		144,692

Difference (A-B)		157,361		58,174		22,809		9,429		2,671

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

ii) Automobile Insurance


(In millions of won)	Payment year
Accident year	After 1 year		After 2 years		After 3 years		After 4 years		After 5 years		After 6 years		After 7 years
Estimate of gross ultimate claims (A)
2008.1.1 ~ 2008.12.31		703,264		703,303		709,665		710,874		712,094		711,413		711,565
2009.1.1 ~ 2009.12.31		795,802		811,679		815,717		818,739		818,974		818,482		—
2010.1.1 ~ 2010.12.31		995,895		1,014,930		1,020,568		1,025,115		1,025,280		—		—
2011.1.1 ~ 2011.12.31		1,090,583		1,107,384		1,117,040		1,121,659		—		—		—
2012.1.1 ~ 2012.12.31		1,118,956		1,148,072		1,156,829		—		—		—		—
2013.1.1 ~ 2013.12.31		1,133,002		1,157,575		—		—		—		—		—
2014.1.1 ~ 2014.12.31		1,177,451		—		—		—		—		—		—

		7,014,953		5,942,943		4,819,819		3,676,387		2,556,348		1,529,895		711,565

Gross cumulative claim payments(B)
2008.1.1 ~ 2008.12.31		586,796		676,438		695,063		703,862		707,845		708,866		709,841
2009.1.1 ~ 2009.12.31		666,632		784,397		802,010		809,130		813,951		815,711		—
2010.1.1 ~ 2010.12.31		851,872		983,646		1,006,653		1,014,860		1,020,814		—		—
2011.1.1 ~ 2011.12.31		930,522		1,068,499		1,095,301		1,110,932		—		—		—
2012.1.1 ~ 2012.12.31		940,322		1,106,938		1,136,365		—		—		—		—
2013.1.1 ~ 2013.12.31		940,296		1,114,979		—		—		—		—		—
2014.1.1 ~ 2014.12.31		971,389		—		—		—		—		—		—

		5,887,829		5,734,897		4,735,392		3,638,784		2,542,610		1,524,577		709,841
Difference (A-B)		1,127,124		208,046		84,427		37,603		13,738		5,318		1,724

iii) Long-term Insurance


(In millions of won)	Payment year
Accident year	After 1 year		After 2 years		After 3 years		After 4 years		After 5 years
Estimate of gross ultimate claims (A)
2010.1.1 ~ 2010.12.31		521,787		682,339		699,161		701,965		702,770
2011.1.1 ~ 2011.12.31		574,869		749,220		768,936		772,659		—
2012.1.1 ~ 2012.12.31		634,920		847,952		872,464		—		—
2013.1.1 ~ 2013.12.31		717,559		965,276		—		—		—
2014.1.1 ~ 2014.12.31		797,967		—		—		—		—

		3,247,102		3,244,787		2,340,561		1,474,624		702,770

Gross cumulative claim payments (B)
2010.1.1 ~ 2010.12.31		498,299		675,423		695,212		699,548		701,312
2011.1.1 ~ 2011.12.31		544,181		741,333		764,854		769,760		—
2012.1.1 ~ 2012.12.31		597,083		836,334		865,332		—		—
2013.1.1 ~ 2013.12.31		679,394		953,234		—		—		—
2014.1.1 ~ 2014.12.31		753,756		—		—		—		—

		3,072,713		3,206,324		2,325,398		1,469,308		701,312

Difference (A-B)		174,389		38,463		15,163		5,316		1,458

(6) Sensitivity analysis of insurance risk

The Group manages insurance risk by performing sensitivity analysis based on discount rate, loss ratio and insurance operating expenses ratio which are considered to have significant influence on future cash flow, timing and uncertainty. According to result of sensitivity analysis, there is no material influence on the capital and net income before tax.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	Assumption change			Effect on LAT
(In millions of won)	Assumption change			2015			2014
Surrenders and termination rates		+10	%		11,408			15,514
		-10	%		(634	)		(3,870	)
Loss ratio		+10	%		2,069,252			1,667,230
		-10	%		(2,069,252	)		(1,667,230	)
Insurance operating expenses ratio		+10	%		229,681			214,307
		-10	%		(229,681	)		(214,307	)
Discount rate		+0.50	%		(1,139,425	)		(1,021,271	)
		-0.50	%		1,318,607			1,223,255

(7) Liquidity risk of insurance contracts

Liquidity risk arising from insurance contracts is the increase in refunds at maturity caused by concentrations of maturity, the increase in surrender values caused by unexpected amounts in cancelation and the increase in payments of claims caused by catastrophic events. The Group manages payment of refunds payable at maturity by analyzing maturity of insurance. Premium reserve’s maturity structure as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Within 1 year		1~5 years		5~10 years		10~20 years		More 20 years		Total
Long-term insurance non participating
Non-linked	￦	90,800		195,361		252,678		74,402		99,982		713,223
Linked		574,068		1,861,552		2,400,327		1,535,227		6,945,769		13,316,943

		664,868		2,056,913		2,653,005		1,609,629		7,045,751		14,030,166

Long-term insurance participating
Non-linked		784		—		—		—		—		784
Annuity
Non-linked		5		140		1,463		4,159		1,739		7,506
Linked		149		34,742		214,197		895,952		1,923,494		3,068,534

		154		34,882		215,660		900,111		1,925,233		3,076,040

Asset-linked
Linked		—		28,235		—		—		—		28,235
Total
Non-linked		91,589		195,501		254,141		78,561		101,721		721,513
Linked		574,217		1,924,529		2,614,524		2,431,179		8,869,263		16,413,712

		665,806		2,120,030		2,868,665		2,509,740		8,970,984		17,135,225

(*)	Includes liabilities classified as an investment contract amounting to ￦115,062 million.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Within 1 year		1~5 years		5~10 years		10~20 years		More 20 years		Total
Long-term insurance non-participating
Non-linked	￦	114,257		237,465		282,612		75,129		101,160		810,623
Linked		566,264		1,814,913		2,411,101		1,420,171		5,480,182		11,692,631

		680,521		2,052,378		2,693,713		1,495,300		5,581,342		12,503,254

Long-term insurance participating
Non-linked		816		879		—		—		—		1,695
Annuity
Non-linked		2		126		1,004		4,352		1,784		7,268
Linked		98		29,742		179,364		793,248		1,758,676		2,761,128

		100		29,868		180,368		797,600		1,760,460		2,768,396

Asset-linked
Linked		19,071		687		27,697		—		—		47,455
Total
Non-linked		115,075		238,470		283,616		79,481		102,944		819,586
Linked		585,433		1,845,342		2,618,162		2,213,419		7,238,858		14,501,214

		700,508		2,083,812		2,901,778		2,292,900		7,341,802		15,320,800

(*)	Includes liabilities classified as an investment contract amounting to ￦118,689 million.

(8) Credit risk of insurance contract

Credit risk of insurance contract is the economic loss arising from non-performing contractual obligations due to decline in credit ratings or default. Through strict internal review, the Group cedes insurance contracts to the insurers rated above BBB- of S&P rating.

As of December 31, 2015, there are 182 reinsurance companies that deal with the Group, and the top three insurance companies’ concentration and credit ratings are as follows:


Reinsurance company	Ratio			Credit rating
KOREAN RE		64.36	%		AA
HDIgerling		3.81	%		AA+
HANNOVER RE		3.81	%		AAA

Exposures to credit risk related to reinsurance as of December 31, 2015 and 2014 were as follows:


(In millions of won)	2015		2014
Reinsurance assets¹		776,234		894,957
Net receivables from reinsurers²		47,119		75,138

		823,353		970,095

1	Net carrying amounts that deduct impairment loss

2	Net carrying amounts of each reinsurance company that offsets reinsurance accounts receivable and reinsurance accounts payable and deduct allowance for loan losses

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(9) Market risk of insurance contract

The interest rate risk exposure from the Group’s insurance contracts is the risk of unexpected losses in net interest income or net assets arising from changes in interest rates and it is managed to minimize the loss experienced. For long-term, non-life insurance contracts, the Group calculates exposure of interest-bearing assets and interest-bearing liabilities. Liabilities exposure is premium reserves after subtracting costs of termination deductions. Asset exposure is interest-bearing assets. Assets that receive only fees without interest are excluded from interest bearing assets. Exposures to interest rate risk as of December 31, 2015 and 2014, are as follows:

i) Exposure to interest rate risk


(In millions of won)	2015		2014
Liabilities
Fixed interest rate		716,786		810,551
Variable interest rate		15,642,298		13,342,841

		16,359,084		14,153,392

Assets
Due from banks		356,960		456,848
Financial assets at fair value through profit or loss		385,700		295,211
Available-for-sale financial assets		6,617,308		5,522,285
Held-to-maturity financial assets		1,932,279		1,421,906
Loans		6,599,146		6,102,210

		15,891,393		13,798,460

ii) Measurement and recognition method

Duration is used to measure interest rate risk within risk based solvency test. ALM system for risk based solvency test is utilized to manage interest rate risk internally. In addition, Risk Management Committee sets ALM strategy every year to manage interest rate risk.

iii) Sensitivity to changes in interest rates

Generally, when interest rates rise, the value and duration of assets and liabilities fall, when interest rates fall, value and duration of assets and liabilities increase. When duration of assets is shorter than duration of liabilities, the interest risk is increased if the interest rates fall since increased asset value is smaller than liabilities increase.

4-3. Credit risk

(1) Overview

Credit risk is the loss arising due to debtor’s default or counterparty’s breach of a contract, which includes the risk of potential loss due to decrease in the value of bonds held (arising from counterparty’s credit rating degrade). Credit risk is caused by a change in value or income in deposits, loans and securities.

(2) Credit risk management

The Group measures credit risk by standard RBC method of Korea Financial Supervisory Service. Credit risk limits are set and managed based on the credit risk resulted from the model. For the Group’s main asset portfolio, limits based on industry and category are set and managed. The Group obtains bonds or loans only when the assets meet the minimum credit rating.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(3) Maximum exposure to credit risk

The Group’s maximum exposure to credit risk without taking account of any collateral held or other credit enhancements as of December 31, 2015 and 2014, is as follows:


(In millions of won)	2015		2014
Financial Assets
Cash and cash equivalents¹		769,203		566,219
Trading assets ²		259,966		867,468
Financial assets designated at fair value through profit or loss²		558,640		417,187
Available-for-sale financial assets ²		6,597,132		5,505,791
Held-to-maturity financial assets		2,148,198		1,635,317
Loans ³		6,755,519		6,420,033
Derivative assets to hedge		11,178		32,598
Other receivables ⁴		757,311		978,828
Reinsurance assets ⁵		776,234		894,957

		18,633,381		17,318,398

¹	Cash on hand, which is not under the influence of credit risk, is excluded.

²	Equity securities and beneficiary certificates are excluded.

³	Net carrying amounts adjusted by allowance for doubtful accounts and deferred loan origination cost (fee).

⁴	Net carrying amounts of each client adjusted by unpaid claims, allowance for doubtful accounts and present value discount.

⁵	Net carrying amounts adjusted by impairment of reinsurance assets.

(4) Credit risk of loans

In order to manage credit risk of loans, the Group sets and manages allowance for credit loss. At the end of the reporting period, the Group recognizes impairment if there is objective evidence that there has been a loss in carrying amount of the amortized cost of loans. According to Korean IFRS, impairment means an incurred loss; impairment on the basis of expected future transactions and events is not recognized despite its possibility of occurrence. The Group measures the incurred loss of financial asset, and this loss is deducted from the carrying amount of the asset.

i) Loans by past due or impairment as of December 31, 2015 and 2014, were as follows:


(In millions of won)	2015			2014
Neither past due nor impaired		6,676,599			6,287,439
Past due but not impaired		69,952			78,452
Impaired		40,124			84,418

		6,786,675			6,450,309

Allowance of neither past due nor impaired		(16,116	)		(1,139	)
Allowance of past due but not impaired		(783	)		(534	)
Allowance of impaired		(14,257	)		(28,603	)
		(31,156	)		(30,276	)

Net carrying value		6,755,519			6,420,033

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

ii)	Neither past due nor impaired loans

①	Estimated fair value of collateral for loans that are neither past due nor impaired as of December 31, 2015 and 2014, is as follows:


	2015
			*Collateral and other credit enhancements ()**
(In millions of won)	Loans		Refund of surrender value		Real estate		Guarantee insurance		Movable property and other		Total
Call loans		40		—		—		—		—		—
Policy loans		1,506,851		1,506,851		—		—		—		1,506,851
Loans secured by real estate		2,655,847		—		2,636,525		—		—		2,636,525
Unsecured loans		207,059		—		—		—		—		—
Loans secured by third party guarantee		29,898		—		—		29,898		—		29,898
Other loans		2,276,904		—		—		—		399,138		399,138

		6,676,599		1,506,851		2,636,525		29,898		399,138		4,572,412

(*)	At the lower of the sum of collateral and other credit enhancement, and the loan balances.


	2014
			*Collateral and other credit enhancements ()**
(In millions of won)	Loans		Refund of surrender value		Real estate		Guarantee insurance		Movable property and other		Total
Call loans		11,798		—		—		—		—		—
Policy loans		1,305,092		1,305,092		—		—		—		1,305,092
Loans secured by securities		84,601		—		—		—		84,601		84,601
Loans secured by real estate		2,637,358		—		2,609,820		—		—		2,609,820
Unsecured loans		108,042		—		—		—		—		—
Loans secured by third party guarantee		33,216		—		—		33,138		—		33,138
Other loans		2,107,332		—		—		—		416,171		416,171

		6,287,439		1,305,092		2,609,820		33,138		500,772		4,448,822

(*)	At the lower of the sum of collateral and other credit enhancement, and the loan balances.

② Credit quality of loans that are neither past due nor impaired as of December 31, 2015 and 2014, is as follows:


	2015
(In millions of won)	Loans		Normal		Precautionary		Substandard		Doubtful		Presumed loss
Call loans		40		40		—		—		—		—
Policy Loans		1,506,851		1,506,851		—		—		—		—
Loans secured by real estate		2,655,847		2,655,847		—		—		—		—
Unsecured loans		207,059		207,059		—		—		—		—
Loan secured by third party guarantees		29,898		29,898		—		—		—		—
Other loans		2,276,904		2,247,345		29,559		—		—		—

		6,676,599		6,647,040		29,559		—		—		—

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Loans		Normal		Precautionary		Substandard		Doubtful		Presumed loss
Call loans		11,798		11,798		—		—		—		—
Policy Loans		1,305,092		1,305,092		—		—		—		—
Loans secured by securities		84,601		84,601		—		—
Loans secured by real estate		2,637,358		2,637,358		—		—		—		—
Unsecured loans		108,042		108,042		—		—		—		—
Loan secured by third party guarantees		33,216		33,216		—		—		—		—
Other loans		2,107,332		2,107,332		—		—		—		—

		6,287,439		6,287,439		—		—		—		—

iii)	Past due but not impaired loans

① Aging analyses of loans that are past due but not impaired as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	1~30 days		31~60 days		61~89 days		Total
Loans secured by real estate		56,079		375		403		56,857
Unsecured loans		3,510		698		475		4,683
Loans secured by third party guarantee		21		50		—		71
Other loans		6,590		1,397		354		8,341

		66,200		2,520		1,232		69,952


	2014
(In millions of won)	1~30 days		31~60 days		61~89 days		Total
Loans secured by real estate		63,404		2,486		—		65,890
Unsecured loans		2,350		271		249		2,870
Loans secured by third party guarantee		6		—		—		6
Other loans		9,013		349		324		9,686

		74,773		3,106		573		78,452

② Estimated fair value of collateral for loans that are past due but not impaired as of December 31, 2015 and 2014, is as follows:


	2015
			*Collateral and other credit enhancements^()**
(In millions of won)	Loans		Real estate		Guarantee insurance		Movable property and other		Total
Loans secured by real estate		56,857		56,468		—		—		56,468
Unsecured loans		4,683		—		—		—		—
Loans secured by third party guarantee		71		—		71		—		71
Other loans		8,341		—		—		8,310		8,310

		69,952		56,468		71		8,310		64,849

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

^(*)

At the lower of the sum of collateral and other credit enhancement, and the loan balances.


	2014
			*Collateral and other credit enhancements^()**
(In millions of won)	Loans		Real estate		Guarantee insurance		Movable property and other		Total
Loans secured by real estate		65,890		65,454		—		—		65,454
Unsecured loans		2,870		—		—		—		—
Loans secured by third party guarantee		6		—		6		—		6
Other loans		9,686		—		—		9,628		9,628

		78,452		65,454		6		9,628		75,088

^(*)

At the lower of the sum of collateral and other credit enhancement, and the loan balances.

iv) Impaired loans

① Estimated fair value of collateral for loans that are impaired as of December 31, 2015 and 2014, is as follows:


	2015
			*Collateral and other credit enhancements()**
(In millions of won)	Loans		Real estate		Guarantee insurance		Movable property and other		Total
Policy loans		405		—		—		355		355
Loans secured by real estate		16,231		16,132		—		—		16,132
Unsecured loans		2,491		—		—		—		—
Other loans		20,997		—		—		3,376		3,376

		40,124		16,132		—		3,731		19,863

(*)	At the lower of the sum of collateral and other credit enhancement, and the loan balances.


	2014
			*Collateral and other credit enhancements ()**
(In millions of won)	Loans		Real estate		Guarantee insurance		Movable property and other		Total
Policy loans		23,373		21,318		—		—		21,318
Loans secured by real estate		1,757		—		—		—		—
Unsecured loans		38		—		38		—		38
Other loans		59,250		5,598		—		2,121		7,719

		84,418		26,916		38		2,121		29,075

(*)	At the lower of the sum of collateral and other credit enhancement, and the loan balances.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

② Impairment loss and impairment loss ratio for impaired loans as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Individual assessment							Collective assessment
	Carrying value before impairment loss		Impairment loss		Ratio			Carrying value before impairment loss		Impairment loss		Ratio
Policy loans	￦	405		50		12.35	%		—		—		—
Loans secured by real estate		—		—		—			16,231		587		3.6	%
Unsecured loans		—		—		—			2,491		1,680		67.4	%
Other loans		17,615		11,785		66.90	%		3,382		156		4.7	%

	￦	18,020		11,835		65.68	%		22,104		2,423		11.0	%


	2014
(In millions of won)	Individual assessment							Collective assessment
	Carrying value before impairment loss		Impairment loss		Ratio			Carrying value before impairment loss		Impairment loss		Ratio
Policy loans	￦	1896		1896		100.0	%		21,477		780		3.6	%
Loans secured by real estate		527		527		100.0	%		1,230		686		55.8	%
Unsecured loans		—		—		—			38		1		2.6	%
Other loans		57,122		24,651		43.2	%		2,128		62		2.9	%

	￦	59,545		27,074		45.5	%		24,873		1,529		6.1	%

(5) Credit risk of securities

i) Credit risk of debt securities as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Neither past due nor impaired		9,562,365		8,419,476
Impaired		958		5,038

		9,563,323		8,424,514

ii) Credit ratings of debt securities as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	*AAA ~ AA+()**		AA ~ A-		BBB+~ BB+		Unrated		Total
Trading assets		229,444		29,909		—		—		259,353
Financial assets designated at fair value through profit or loss		264,359		294,281		—		—		558,640
Available-for-sale financial assets		4,535,994		2,050,149		10,585		404		6,597,132
Held-to-maturity financial assets		2,105,903		40,000		—		2,295		2,148,198

		7,135,700		2,414,339		10,585		2,699		9,563,323

(*)	Debt securities issued by government and municipalities are included.


	2014
(In millions of won)	*AAA ~ AA+()**		AA ~ A-		BBB+~ BB+		Unrated		Total
Trading assets		798,781		65,088		2,350		—		866,219
Financial assets designated at fair value through profit or loss		229,066		188,121		—		—		417,187
Available-for-sale financial assets		4,173,236		1,326,823		694		5,038		5,505,791
Held-to-maturity financial assets		1,593,551		40,000		—		1,766		1,635,317

		6,794,634		1,620,032		3,044		6,804		8,424,514

(*)	Debt securities issued by government and municipalities are included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(6) Credit risk of derivative assets

Credit ratings of derivatives as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	AAA ~ AA+		AA ~ A-		Total
Trading derivatives
Currency related		372		73		445
Other		165		—		165

		537		73		610

Hedging derivatives
Interest rate related		352		—		352
Currency related		10,604		222		10,826

		10,956		222		11,178

Total		11,493		295		11,788


	2014
(In millions of won)	AAA ~ AA+		AA ~ A-		Total
Trading derivatives
Currency related		29		—		29
Stock related		—		89		89
Other		938		193		1,131

		967		282		1,249

Hedging derivatives
Currency related		32,598		—		32,598

Total		33,565		282		33,847

(7) Concentration of credit risk

An analysis of concentration of credit risk of loans and securities by geographical area and industry sector as of December 31, 2015 and 2014, is as follows:

i) Geographical area


	2015
(In millions of won)	Korea		United States		Other		Total
Trading assets		259,966		—		—		259,966
Financial assets designated at fair value through profit or loss		475,763		—		82,877		558,640
Available-for-sale financial assets		5,066,382		609,031		921,719		6,597,132
Held-to-maturity financial assets		2,145,903		—		2,295		2,148,198
Loans		6,755,424		—		95		6,755,519
Hedging derivatives		11,178		—		—		11,178

		14,714,616		609,031		1,006,986		16,330,633


	2014
(In millions of won)	Korea		United States		Other		Total
Trading assets		867,468		—		—		867,468
Financial assets designated at fair value through profit or loss		417,187		—		—		417,187
Available-for-sale financial assets		4,544,092		280,264		681,435		5,505,791
Held-to-maturity financial assets		1,633,551		—		1,766		1,635,317
Loans		6,419,969		—		64		6,420,033
Hedging derivatives		32,598		—		—		32,598

		13,914,865		280,264		683,265		14,878,394

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

ii) Industry sector


	2015
(In millions of won)	Financial institutions		Household		Public sector		Real estate		Other		Total
Trading assets		73,118		—		153,242		—		33,606		259,966
Financial assets designated at fair value through profit or loss		511,700		—		—		—		46,940		558,640
Available-for-sale financial assets		2,316,479		—		2,783,905		—		1,496,748		6,597,132
Held-to-maturity financial assets		182,008		—		1,926,190		—		40,000		2,148,198
Loans		700,725		4,118,118		—		549,511		1,387,165		6,755,519
Hedging derivatives		11,178		—		—		—		—		11,178

		3,795,208		4,118,118		4,863,337		549,511		3,004,459		16,330,633


	2014
(In millions of won)	Financial institutions		Household		Public sector		Real estate		Other		Total
Trading assets		154,264		—		642,353		1,795		69,056		867,468
Financial assets designated at fair value through profit or loss		370,458		—		—		—		46,729		417,187
Available-for-sale financial assets		1,228,903		—		2,692,022		—		1,584,866		5,505,791
Held-to-maturity financial assets		60,708		—		1,554,609		—		20,000		1,635,317
Loans		312,218		3,860,610		—		548,038		1,699,167		6,420,033
Hedging derivatives		32,598		—		—		—		—		32,598

		2,159,149		3,860,610		4,888,984		549,833		3,419,818		14,878,394

(8) Classification of asset quality for loans and other receivables

Classification of asset quality for loans and other receivables as of December 31, 2015 and 2014, is as follows:


	2015
(In millions of won)	Normal		Precautionary		Substandard		Doubtful		Presumed loss		Total
Loans¹
Call loans		40		—		—		—		—		40
Policy loans		1,507,206		—		—		—		50		1,507,256
Loans secured by real estate		2,692,797		772		15,633		315		193		2,709,710
Unsecured loans		210,584		1,173		153		1,260		1,076		214,246
Loans secured by third party guarantees		29,917		50		—		—		—		29,967
Other loans		2,255,773		31,387		399		1,810		18,782		2,308,151

		6,696,317		33,382		16,185		3,385		20,101		6,769,370

Other receivables
Insurance accounts receivables²		101,192		22,956		2,569		4,037		10,386		141,140
Accounts receivables		79,485		123		114		38		388		80,148
Accrued revenue³		28,073		217		47		103		71		28,511
Notes receivables		410		—		—		—		—		410

		209,160		23,296		2,730		4,178		10,845		250,209

		6,905,477		56,678		18,915		7,563		30,946		7,019,579

¹	Amount before adjusting by deferred loan origination fees and costs, allowance for doubtful accounts and present value discount.

²	Amount after offsetting insurance accounts payables by counterparties

³	Accrued interest related to loans

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Normal		Precautionary		Substandard		Doubtful		Presumed loss		Total
Loans¹
Call loans		11,798		—		—		—		—		11,798
Policy loans		1,305,092		—		—		—		—		1,305,092
		84,601		—		—		—		—		84,601
Loans secured by real estate		2,684,174		2,916		19,223		2,627		420		2,709,360
Unsecured loans		110,417		521		63		546		1,147		112,694
Loans secured by third party guarantees		33,245		—		38		—		—		33,283
Other loans		2,117,546		668		22,761		1,191		35,227		2,177,393

		6,346,873		4,105		42,085		4,364		36,794		6,434,221

Other receivables
Insurance accounts receivables²		116,336		43,686		11,007		3,462		7,221		181,712
Accounts receivables		120,013		67		149		92		736		121,057
Accrued revenue³		40,798		50		96		87		158		41,189
Notes receivables		335		—		—		—		—		335

		277,482		43,803		11,252		3,641		8,115		344,293

		6,624,355		47,908		53,337		8,005		44,909		6,778,514

¹	Amount before adjusting by deferred loan origination fees and costs, allowance for doubtful accounts and present value discount.

²	Amount after offsetting insurance accounts payables by counterparties

³	Accrued interest related to loans

4-4. Liquidity risk

(1) Overview

Liquidity risk is the risk of unexpected losses from change in cash flow by difference of maturities between assets and liabilities and increase in cancelation of insurance contracts. For the control of the risk, the difference of assets and liabilities maturities needs to be solved and the unexpected losses from cash outflow should be minimized.

(2) Liquidity risk management

The Group analyzes differences between funding and the use of funds beforehand to manage liquidity risk. In addition, to evaluate the Group’s liquidity management skills during an extreme crisis situation, the Group uses various crisis scenarios that will be caused due to an increase in surrender value to analyze and manage the liquidity risk.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(3) Maturity analysis of financial liabilities

Maturities of financial liabilities as of December 31, 2015 and 2014, are as follows:

i) Maturities of financial liabilities


	2015
(In millions of won)	On demand		Less than 30 days		1~3 months		3~12 months		1~5 years		More than 5 years		Total
Financial liabilities at fair value through profit or loss
Trading derivatives		1,292		2,461		635		1,184		—		1,430		7,002
Other financial liabilities
Insurance accounts payable		21,670		184,975		86,921		85,190		—		—		378,756
Accrued expenses		253		90,047		—		861		—		—		91,161
Others		5,974		39,429		4		5,171		7,588		572		58,738

		27,897		314,451		86,925		91,222		7,588		572		528,655

Purchase and acquisition commitments		—		54,600		60,000		—		—		—		114,600

		29,189		371,512		147,560		92,406		7,588		2,002		650,257


	2014
(In millions of won)	On demand		Less than 30 days		1~3 months		3~12 months		1~5 years		More than 5 years		Total
Financial liabilities at fair value through profit or loss
Trading derivatives		2,621		—		7		—		—		2,182		4,810
Securities sold		—		184,858		—		—		—		—		184,858

		2,621		184,858		7		—		—		2,182		189,668

Deposits		95,497		—		—		—		—		—		95,497
Debts		235,302		—		—		60,000		—		—		295,302
Other financial liabilities
Insurance accounts payable		35,118		167,286		81,758		69,916		—		—		354,078
Accrued expenses		313		97,562		—		569		—		—		98,444
Others		28,354		44,227		17,849		6,939		3,114		772		101,255

		63,785		309,075		99,607		77,424		3,114		772		553,777

Purchase and acquisition commitments		—		45,000		60,000		—		—		—		105,000

		397,205		538,933		159,614		137,424		3,114		2,954		1,239,244

ii) Maturities of hedging derivatives liabilities


	2015
(In millions of won)	Less than 30 days			1~3 months			3~12 months			1~5 years			Total
Currency forwards
Cash inflow		121,393			427,668			1,233,332			242,178			2,024,571
Cash outflow		127,596			449,137			1,277,593			256,111			2,110,437

Net cash flow		(6,203	)		(21,469	)		(44,261	)		(13,933	)		(85,866	)

Currency swaps
Cash inflow		67			1,004			56,677			56,387			114,135
Cash outflow		53			965			60,120			58,854			119,992

Net cash flow		14			39			(3,443	)		(2,467	)		(5,857	)

Total
Cash inflow		121,460			428,672			1,290,009			298,565			2,138,706
Cash outflow		127,649			450,102			1,337,713			314,965			2,230,429

Net cash flow		(6,189	)		(21,430	)		(47,704	)		(16,400	)		(91,723	)

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Less than 30 days			1~3 months			3~12 months			1~5 years			Total
Currency forwards
Cash inflow		172,043			449,631			1,043,997			34,930			1,700,601
Cash outflow		176,878			460,197			1,078,914			36,038			1,752,027

Net cash flow		(4,835	)		(10,566	)		(34,917	)		(1,108	)		(51,426	)

Currency swaps
Cash inflow		7,850			—			13,703			—			21,553
Cash outflow		8,134			—			14,326			—			22,460

Net cash flow		(284	)		—			(623	)		—			(907	)

Total
Cash inflow		179,893			449,631			1,057,700			34,930			1,722,154
Cash outflow		185,012			460,197			1,093,240			36,038			1,774,487

Net cash flow		(5,119	)		(10,566	)		(35,540	)		(1,108	)		(52,333	)

Maturity analysis above is presented using the undiscounted cash flows and based on the Group’s earliest payment date, including principal and interest.

4-5. Market risk

(1) Definition

Market risk is the risk of possible loss that an asset might experience due to changes in stock prices, interest rates, and/or exchange rates. Market risk usually occurs from securities and financial derivatives.

(2) Purpose of market risk management

The goal of market risk management is to prepare for unexpected losses due to the market’s unfavorable changes in interest rates, stock prices and exchange rates managing risk in accordance with the Group’s tolerance levels and maximizing revenue against risks incurred.

(3) Method of market risk management

i) Measurement of market risk

Market risk is measured by Financial Supervisory Service’s standard model. The model provided by the Financial Supervisory Service is based on RBC system, widely used by insurance companies. By analyzing the market’s sensitivity, the Group regularly analyzes its market portfolio risk.

ii) Control of market risk

In order to control market risk, the Group runs a committee, reviews structured securities beforehand and manages the limits. In a way of market risk management, investments that exceed a certain level of risk must be authorized by the investment review committee. Structured securities must be reviewed by the risk management department, separate from the operating department, during an execution of an investment. In addition, in order to control market risk, certain limits, position limits, loss limits, and risk limits are set and regularly checked for compliance.

iii) Report of market risk

Market risk management, important key factors and limit management status are reported regularly to the risk management committee.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(4) Sensitivity analysis

Sensitive analysis of foreign exchange rate, interest rate and stock price as of December 31, 2015 and 2014, are as follows:

i) Exchange rate


(In millions of won)	Effect on profit or loss			Effect on other comprehensive income
December 31, 2015
￦100 increase KRW/USD FX Rate		2,388			686
￦100 decrease KRW/USD FX Rate		(2,388	)		(686	)
December 31, 2014
￦100 increase KRW/USD FX Rate		3,932			665
￦100 decrease KRW/USD FX Rate		(3,932	)		(665	)

ii) Interest rate


(In millions of won)	Effect on profit or loss			Effect on other comprehensive income
December 31, 2015
100bp increase		(11,593	)		(238,262	)
100bp decrease		11,593			238,262
December 31, 2014
100bp increase		(6,129	)		(156,214	)
100bp decrease		6,129			156,214

iii) Stock price


(In millions of won)	Effect on profit or loss			Effect on other comprehensive income
December 31, 2015
10% increase		444			82,756
10% decrease		(444	)		(82,756	)
December 31, 2014
10% increase		6,237			60,425
10% decrease		(6,237	)		(60,425	)

4-6. Capital adequacy test

(1) Purpose of capital management

The goal of capital management is to maintain the ability to make the payments by having enough assets on hand, even when an unexpected loss occurs.

(2) Subjects of the capital management

Through setting the limit and managing the aggregated and individual risk (insurance/interest rate/credit/operating), the Group manages asset risk. When the limit is set, available capital is taken into consideration to set the limit for asset risk.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

i) Available capital is a risk buffer, which helps maintain the ability to make payments when the Group experiences an unexpected loss. Available capital is calculated as core capital and supplementary capital after deduction of certain deduction items and deficit of capital in subsidiaries, described as follows:


		Description
Core capital		Paid-in capital, capital surplus, retained earnings, accumulated other comprehensive income etc.

Supplementary capital		Subordinated debt, hybrid bond, reserve for participating policyholders’ dividends, normal and precautionary amount of bad debt reserve and allowance for credit loss, deferred tax liability regarding emergency risk reserve

Deductions		Deferred acquisition costs, intangible assets (e.g., goodwill), prepaid expenses, deferred tax assets, estimated amount of cash dividends to shareholders, etc.

Subsidiaries’ deficiency of capital		The deficiency in net assets of subsidiaries was increased or decreased based on the insurance company’s ownership amount

ii) Required capital is the amount of risk calculated based on the scale of insurance/interest rate/credit/market/operating risk internal to the Group. The total amount of required capital is calculated based on the correlation between it and the individual risk.


		Definition
Insurance risk		The risk of loss due to unexpected increase in loss ratio.

Interest rate risk		The risk that the decrease in net value, caused by change in interest rate, will have a negative effect on economic status.

Credit risk		The risk that loss will arise due to debtor’s default or counterparty’s breach of contract

Market risk		Risk of loss due to the change in market cost (stock, interest rate, exchange rate)

Operating risk		Risk of loss due to inappropriate internal procedure, human capital, system and external events.

(3) External requirement of capital adequacy and implementation of capital management

For the asset management of insurance companies, supervisory authorities use methods that evaluate the RBC ratio, quarterly timely improve the RBC ratio (based on RBC ratio; divided into recommendation, need or command of management improvement), and uses RBC ratio in Risk Assessment and Application System (‘RAAS’). During this process, timely corrective action is used based on the level where the RBC ratio is below 100%. In order to connect the internal model with asset management standard, RBC standard of available capital is applied to risk limits of transcription and limit distribution of individual risk.

(4) Achievement of capital management goal

In order to achieve the goals of asset management, it is operated based on the set limit of aggregated risk and individual risk and its results are regularly reported to the management and risk management risk committee. When setting the limit, the limit is maintained at a level so that payment is possible and compliance with these rules are regularly checked so that the goal of asset management can be reached. In addition, the Group currently maintains at or above this standard as of December 31, 2015 and 2014.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

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

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.

Deposits, debts, 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.

The carrying value and the fair value of financial instruments measured at amortized cost as of December 31, 2015 and 2014, are as follows:


	2015				2014
(In millions of won)	Carrying value		Fair value		Carrying value		Fair value
Financial assets
Cash and cash equivalents		769,208		769,208		566,224		566,224
Held-to-maturity financial assets		2,148,198		2,367,740		1,635,317		1,764,585
Loans		6,755,519		6,842,596		6,420,033		6,520,913
Other receivables		907,176		907,999		1,145,210		1,127,873

		10,580,101		10,887,543		9,766,784		9,979,595

Financial liabilities
Deposits		—		—		95,497		95,497
Debts		—		—		295,302		295,302
Other financial liabilities		528,312		528,312		553,468		553,468

		528,312		528,312		944,267		944,267

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(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.

In case that any occurrence that may cause changes in fair value levels, the transfers between levels are deemed to have occurred at the beginning of the financial period.

i) As of December 31, 2015 and 2014, the level of the fair value hierarchy within which the fair value measurement are categorized as follows:


	2015
(In millions of won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Trading assets		195,614		195,618		30,074		421,306
Financial assets designated at fair value through profit or loss		—		39,550		519,090		558,640

		195,614		235,168		549,164		979,946

Available-for-sale financial assets ¹		1,058,437		5,858,391		1,575,533		8,492,361
Hedging derivative assets		—		11,178		—		11,178

		1,254,051		6,104,737		2,124,697		9,483,485

Financial liabilities
Financial liabilities designated at fair value through profit or loss		1,292		4,279		1,431		7,002
Hedging derivative liabilities		—		95,336		—		95,336

		1,292		99,615		1,431		102,338

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


	2014
(In millions of won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Trading assets		649,307		425,421		29,584		1,104,312
Financial assets designated at fair value through profit or loss		—		64,509		352,678		417,187

		649,307		489,930		382,262		1,521,499

Available-for-sale financial assets¹		1,092,256		4,751,784		1,196,175		7,040,215
Hedging derivative assets		—		32,598		—		32,598

		1,741,563		5,274,312		1,578,437		8,594,312

Financial liabilities
Financial liabilities designated at fair value through profit or loss		185,604		1,882		2,182		189,668
Hedging derivative liabilities		—		63,411		—		63,411

		185,604		65,293		2,182		253,079

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 (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

ii) The fair value hierarchy of financial instruments which are not measured at fair value but disclosed in the financial statements as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Level 1		Level 2		Level 3		Total
Financial assets
Held-to-maturity financial assets		1,671,236		694,209		2,295		2,367,740
Loans		—		471,094		6,371,502		6,842,596
Other receivables		—		262,643		645,356		907,999

		1,671,236		1,427,946		7,019,153		10,118,335

Financial liabilities
Other financial liabilities		—		—		528,311		528,311

	2014
(In millions of won)	Level 1		Level 2		Level 3		Total
Financial assets
Held-to-maturity financial assets		1,184,084		578,735		1,766		1,764,585
Loans		—		530,358		5,990,555		6,520,913
Other receivables		32,500		397,637		697,736		1,127,873

		1,216,584		1,506,730		6,690,057		9,413,371

Financial liabilities
Deposits		95,497		—		—		95,497
Debts		—		—		295,302		295,302
Other financial liabilities		—		—		553,468		553,468

		95,497		—		848,770		944,267

(3) Financial instruments that are measured at acquisition cost due to inability to measure the reliable fair value as of December 31, 2015 and 2014, are as follows:


(In millions of Korean won)	2015		2014
Available-for-sale financial assets		68,111		99,662

(4) There was no transfer between level 1 and level 2 for the period ended December 31, 2015.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(5) Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015
	Fair value		Valuation techniques	Inputs
Financial assets
Trading assets		195,618	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Financial assets designated at fair value through profit or loss		39,550	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Available-for-sale financial assets¹		5,858,391	Discounted cash flow, option pricing model, net asset value	Price of underlying assets, discount rate, volatility
Hedging derivatives		11,178	Discounted cash flow	Discount rate, foreign exchange rate

		6,104,737

Financial liabilities
Financial liabilities designated at fair value through profit or loss		4,279	Discounted cash flow	Discount rate, foreign exchange rate
Hedging derivatives		95,336	Discounted cash flow	Discount rate, foreign exchange rate

		99,615

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)	2014
	Fair value		Valuation techniques	Inputs
Financial assets
Trading assets		425,421	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Financial assets designated at fair value through profit or loss		64,509	Discounted cash flow, option pricing model	Price of underlying assets, discount rate, volatility
Available-for-sale financial assets¹		4,751,784	Discounted cash flow, option pricing model, net asset value	Discount rate
Hedging derivatives		32,598	Discounted cash flow	Discount rate, foreign exchange rate

		5,274,312

Financial liabilities
Financial liabilities designated at fair value through profit or loss		1,882	Discounted cash flow	Discount rate, foreign exchange rate
Hedging derivatives		63,411	Discounted cash flow	Discount rate, foreign exchange rate

		65,293

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 (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(6) Disclosure about financial instruments classified as level 3

i) Changes in level 3 of the fair value hierarchy for the years ended December 31, 2015 and 2014, are as follows:


	2015
(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		29,584		352,678			1,196,175			2,182
Total income (loss)
Profit or loss		57		(1,859	)		5,268			(751	)
Other comprehensive income		—		—			39,113			—
Purchase		—		263,084			487,342			—
Settlement		—		(94,813	)		(155,036	)		—
Transfer to assets held for sale		—		—			(2,665	)		—
Reclassification from level 3 to other levels ¹		—		—			(31,967	)		—
Reclassification from other levels to level 3 ²		433		—			38,959			—
Others		—		—			(1,656	)		—

		30,074		519,090			1,575,533			1,431

¹	The amount of equity securities that goes public on this period.

²	Equity securities that were measured at acquisition costs on the prior period and measured at fair value on this period.


	2014
(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		48,861			223,558			696,680			2,010
Total income (loss)
Profit or loss		1,037			7,244			14,434			172
Other comprehensive income		—			—			46,064			—
Purchase		—			161,876			538,325			—
Settlement		(20,314	)		(40,000	)		(101,278	)		—
Reclassification from other levels to level 3 ¹		—			—			1,950			—

		29,584			352,678			1,196,175			2,182

¹	Equity securities that were measured at acquisition costs on the prior period and measured at fair value on this period.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

ii) Information about significant unobservable inputs in measuring financial instruments categorized as level 3 as of December 31, 2015 and 2014, are as follows:

2015

(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

30,074

Discounted cash flow, option pricing model

The volatility of the underlying asset

5.39~40.50

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

Correlations

17.33

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

Financial assets designated at fair value through profit or loss

519,090

Discounted cash flow, option pricing model

The volatility of the underlying asset

10.57~50.14

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

Correlations

17.33~90.00

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

1,575,533

Discounted cash flow, option pricing model,

net asset method

Discount rate

0.85~10.13

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

Growth rate

1.80~6.42

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

The volatility of the underlying asset

34.90~50.14

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

Correlations

48.27~87.94

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

2,124,697

Financial liabilities

Financial liabilities at fair value through profit or loss

1,431

Option pricing model

The volatility of the underlying asset

34.90~37.20

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 (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

2014

(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

29,584

Discounted cash flow, option pricing model

The volatility of the underlying asset

3,40~5.55

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

Correlations

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.

Financial assets designated at fair value through profit or loss

352,678

Discounted cash flow, option pricing model

The volatility of the underlying asset

11.0~71.62

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

Correlations

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

1,196,175

Discounted cash flow, option pricing model,

net asset method

Discount rate

6.68~14.96

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

Growth rate

0~5.72

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

Correlations

16.25~83.34

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

The volatility of the underlying asset

16.25~71.62

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

EV/EBITDA

15.3~36.98X

A significant increase in EV/EBITDA would result in a higher fair value

EV/SALES

1.8X

A significant increase in EV/SALESwould result in a higher fair value

1,578,437

Financial liabilities

Financial liabilities at fair value through profit or loss

2,182

Option pricing model

The volatility of the underlying asset

16.25~21.45

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 (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

iii) Sensitive analysis of changes in unobservable inputs as of December 31, 2015 and 2014, are as follows:


	2015
	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 loss ¹		1,530		—		(1,544	)		—
Available-for-sale financial assets ²		—		2,919		—			(2,304	)

		1,530		2,919		(1,544	)		(2,304	)

Financial liabilities
Financial liabilities at fair value through profit or loss ³		29		—		(32	)		—

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 of discount rate (1%), growth rate (10%), correlation (10%), volatility of underlying assets (1%), EV/EBITDA (10%) or EV/Sales (10%).

³	Based on increase or decrease in volatility of underlying assets (1%).


	2014
	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 loss ¹		604		—		(590	)		—
Available-for-sale financial assets ²		—		9,379		—			(3,235	)

		604		9,379		(590	)		(3,235	)

Financial liabilities
Financial liabilities at fair value through profit or loss ³		53		—		(46	)		—

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 of discount rate (1%), growth rate (10%), correlation (10%) volatility of underlying assets (1%), EV/EBITDA (10%) or EV/Sales (10%).

³	Based on increase or decrease in volatility of underlying assets (1%).

(7) Transfer deal of financial instruments

Financial instruments that are continuously recognized since those transactions are not qualified for derecognition as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Financial assets at fair value through profit or loss		—		20,426

Details of repurchase agreements related to the debt securities above as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Repurchase agreements		—		20,000

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(8) 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 December 31, 2015 and 2014, are as follows:


	2015
	Financial assets and liabilities recognized		Offsetting financial assets and liabilities recognized		Financial assets and liabilities recognized after offset		Amount not offsetting in the statements of financial position					Net amounts
(In millions of won)	Financial assets and liabilities recognized		Offsetting financial assets and liabilities recognized				Financial instruments			Cash collateral received		Net amounts
Financial assets
Financial assets at fair value through profit or loss		281		—		281		(281	)		—		—
Hedging derivatives		11,178		—		11,178		(11,178	)		—		—

		11,459		—		11,459		(11,459	)		—		—

Financial liabilities
Financial liabilities at fair value through profit or loss		4,280		—		4,280		—			—		4,280
Hedging derivatives		95,336		—		95,336		(11,459	)		—		83,877

		99,616		—		99,616		(11,459	)		—		88,157


	2014
	Financial assets and liabilities recognized		Offsetting financial assets and liabilities recognized		Financial assets and liabilities recognized after offset		Amount not offsetting in the statements of financial position					Net amounts
(In millions of won)	Financial assets and liabilities recognized		Offsetting financial assets and liabilities recognized				Financial instruments			Cash collateral received		Net amounts
Financial assets
Hedging derivatives		32,598		—		32,598		23,711			—		8,887
Payment guarantee		84,601		—		84,601		84,601			—		—
Other receivables		27,968		2,746		25,222		24,786			—		436

		145,167		2,746		142,421		133,098			—		9,323

Financial liabilities
Financial liabilities at fair value through profit or loss		186,747		—		186,747		185,814			—		933
Hedging derivatives		63,411		—		63,411		22,762			—		40,649
Repurchase agreements		235,302		—		235,302		235,302			—		—
Other payables		28,789		2,746		26,043		24,784			—		1,259

		514,249		2,746		511,503		468,662			—		42,841

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

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 years ended December 31, 2015 and 2014, are as follows:


	2015
	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 commission income (expense)			Total			Other comprehe- nsive income
Cash and cash equivalents	￦	2,233			—		—			—			—			—		—			2,233			—
Trading assets		9,631			1,597		5,660			1,181			—			3,999		—			22,068			—
Financial assets designated at fair value through profit or loss		15,754			—		(1,582	)		(7,883	)		—			7,405		(2,586	)		11,108			—
Available-for-sale financial assets		214,611			64,376		61,263			—			(18,318	)		146,940		164			469,036			42,530
Held-to-maturity financial assets		65,758			—		942			—			—			2,896		—			69,596			—
Hedging derivatives		—			—		(50,374	)		(92,418	)		—			—		—			(142,792	)		(661	)
Loans and other receivables		307,098			—		(24	)		—			(11,445	)		17,500		1,453			314,582			—
Financial liabilities		(752	)		—		—			—			—			—		—			(752	)		—

		614,333			65,973		15,885			(99,120	)		(29,763	)		178,740		(969	)		745,079			41,869


	2014
	Profit or loss
(In millions of won)	Interest income (expense)			Dividend income		Gain (loss) on disposal			Gain (loss) on valuation			Impairme- nt loss			Foreign currency transaction gain (loss)		Fees and commission income (expense)			Total			Other compre- hensive loss
Cash and cash equivalents	￦	3,696			—		—			—			—			—		—			3,696			—
Trading assets		23,783			798		28,135			(2,079	)		—			130		—			50,767			—
Financial assets designated at fair value through profit or loss		11,493			—		(2,809	)		12,896			—			2,413		(2,479	)		21,514			—
Available-for-sale financial assets		176,030			54,442		43,523			—			(9,904	)		77,005		164			341,260			162,551
Held-to-maturity financial assets		57,733			—		—			—			—			1,811		—			59,544			—
Hedging derivatives		—			—		8,654			(66,993	)		—			—		—			(58,339	)		1,001
Loans and other receivables		311,195			—		1,957			—			(5,397	)		13,759		1,007			322,521			—
Financial liabilities		(10,552	)		—		—			(735	)		—			—		—			(11,287	)		—

	￦	573,378			55,240		79,460			(56,911	)		(15,301	)		95,118		(1,308	)		729,676			163,552

¹	Amounts before reclassifying financial instrument segment profit or loss 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 (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

7. Segment Information

(1) Segment information

The Group operates insurance, security and other businesses in Korea, the United States of America, China and Indonesia. The Group recognizes its segments in the division through which it has access to the information of generation of income and expenses, segmental appraisal on performance and financial information. By the integration and separation based on the economic similarities between the segments, such as the characteristics of services and significance of generated profit, the recognized segments are divided into three reporting segments as follows:

- Non-life insurance: Engages in business activities such as contracting non-life insurance and other concurrent insurance permitted, collecting premium and paying insurance claims; engages also in permitted concurrence asset management and other incidental services as claim adjustments.

- Securities: Engages in securities business, such as investment trades and investment brokerage

- Others: Consolidated beneficiary certificates and others

(2) Net income of the business segments for the years ended December 31, 2015 and 2014, are as follow:


		2015
(In millions of won)		Non-life insurance			Securities¹			Other segments			Adjustment			Total
Insurance income	Amount		9,914,300			—			—			(4,442	)		9,909,858
	Ratio	￦	100.04	%		—			—			(0.04	)%		100.00	%
Investment income	Amount		842,421			102,769			25,184			(124,921	)		845,453
	Ratio		99.64	%		12.16	%		2.98	%		(14.78	)%		100.00	%
Insurance expenses	Amount		10,459,749			—			—			(149,382	)		10,310,367
	Ratio		101.45	%		—			—			(1.45	)%		100.00	%
Investment expenses	Amount		376,640			78,236			8,099			(89,559	)		373,416
	Ratio		100.86	%		20.95	%		2.17	%		(23.98	)%		100.00	%
Other income (expenses)	Amount		258,032			(16,071	)		3,908			(128,723	)		117,146
	Ratio	￦	220.27	%		(13.72	)%		3.33	%		(109.88	)%		100.00	%
Profit from continuing operations	Amount		178,364			—			20,993			(10,683	)		188,674
	Ratio		94.54	%		—			11.12	%		(5.66	)%		100.00	%
Profit from discontinued operations	Amount		—			8,462			—			(37,788	)		(29,326	)
	Ratio		—			(28.85	)%		—			128.85	%		100.00	%
Profit for the year	Amount		178,364			8,462			20,993			(48,471	)		159,348
	Ratio		111.93	%		5.31	%		13.17	%		(30.42	)%		100.00	%

¹	Classified as disposal group held for sale as of December 31, 2015.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


		2014
		Non-life insurance			Securities¹			Other segments			Adjustment			Total
Insurance income	Amount		9,755,427			—			—			(4,165	)		9,751,262
	Ratio	￦	100.04	%		—			—			(0.04	)%		100.00	%
Investment income	Amount		773,363			76,889			19,443			(3,441	)		866,254
	Ratio		89.28	%		8.88	%		2.24	%		(0.40	)%		100.00	%
Insurance expenses	Amount		10,371,203			—			—			(138,003	)		10,233,200
	Ratio		101.35	%		—			—			(1.35	)%		100.00	%
Investment expenses	Amount		243,041			53,481			14,797			—			311,319
	Ratio		78.07	%		17.18	%		4.75	%		—			100.00	%
Other income (expenses)	Amount		194,573			(24,129	)		(210	)		(134,001	)		36,232
	Ratio	￦	537.02	%		(66.60	)%		(0.58	)%		(369.84	)%		100.00	%
Profit from continuing operations	Amount		109,119			—			4,436			(3,604	)		109,951
	Ratio		99.24	%		—			4.03	%		(3.28	)%		100.00	%
Profit from discontinued operations	Amount		—			(722	)		—			—			(722	)
	Ratio		—			100.00	%		—			—			100.00	%
Profit for the year	Amount		109,119			(722	)		4,435			(3,604	)		109,229
	Ratio		78.63	%		(0.52	)%		3.20	%		(2.60	)%		100.00	%

(3) Geographical information

The Group operates its business in Korea, the United States of America, China and Indonesia, and Korea is the country in which the Group is headquartered. Geographical operating revenues from external customers for the years ended December 31, 2015 and 2014, and non-current assets as of December 31, 2015 and 2014, are as follows:

1) Geographical operating revenues from external customers for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Korea		10,780,273		10,576,766
Other countries		104,401		48,356

(*)		10,884,674		10,625,122

(*)	The amount is insurance and investment income before adjustment for consolidation, and before reclassified profit of LIG Investment & Securities Co., Ltd to profit from discontinued operations.

2) Geographical non-current assets as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Korea		1,176,187		1,198,636
Other countries		1,974		1,865

(*)		1,178,161		1,200,501

(*)	Non-current assets of LIG Investment & Securities Co., Ltd, classified as assets held for sale, are included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

8. Cash and cash equivalents

Cash and cash equivalents as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Cash		5		5
Checking account		513		812
Regular savings account		87,650		57,703
Deposit money		1,150		150
Deposits in foreign currency		144,333		52,946
Others		535,557		454,608

		769,208		566,224

9. Financial assets at fair value through profit or loss

(1) Trading assets

Trading assets as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Equity securities¹
Stocks		8,730		81,690
Debt securities²
Government and public bonds		153,242		433,321
Financial bonds		—		31,335
Special bonds		33,604		302,864
Corporate Bond		—		27,115
Beneficiary certificates³
Debt type		13,650		44,538
Stock type		5,342		9,608
Mixed type		—		94,185
Others		120,037		1,871
Securities in foreign currency²³
Stocks		37		403
Debt securities		42,599		42,000
Beneficiary certificates		13,544		4,549
Other securities⁴
Derivative Linked Securities (DLS)		19,707		19,166
Derivative Linked Bonds (DLB)		10,203		10,418
Trading derivatives⁵		611		1,249

		421,306		1,104,312

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 (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

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

Financial assets designated at fair value through profit or loss as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Securities in foreign currency¹
Hybrid securities		105,878		44,598
Others		59,965		33,766
Other securities¹
Equity Linked Securities (ELS)		44,692		42,747
Equity Linked Bonds (ELB)		20,044		—
Derivative Linked Securities (DLS)		202,282		133,888
Derivative Linked Bonds (DLB)		61,460		97,641
Others		64,319		64,547

		558,640		417,187

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.

10. Available-for-sale financial assets

Available-for-sale financial assets as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Equity securities¹
Listed equity securities		172,250		97,929
Unlisted equity securities		76,192		140,884
Investments in partnerships		183,987		168,673

		432,429		407,486

Debt securities²
Government and public bonds		789,317		965,843
Special bonds		1,214,713		1,085,719
Bank debenture		638,907		597,562
Corporate bonds		1,142,120		887,570

		3,785,057		3,536,694

Beneficiary certificates³
Debt type		—		61,337
Stock type		160,785		167,095
Mixed type		21,462		81,613
Others		926,329		570,476

		1,108,576		880,521

Securities in foreign currency⁴
Investments in partnerships		86,072		60,136
Debt securities		2,334,380		1,703,858
Others		539,201		384,504

		2,959,653		2,148,498

Other securities⁵
Others		274,757		166,678

		8,560,472		7,139,877

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.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

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

11. Held-to-maturity financial assets

Held-to-maturity financial assets as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Debt securities
Government and public bonds		1,513,259		1,100,103
Special bonds		486,704		410,538
Bank debenture		59,060		58,942
Corporate bonds		40,000		20,000
Securities in foreign currency
Bank debenture		49,175		45,734

		2,148,198		1,635,317

12. Loans and other receivables

Loans and other receivables as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Loans
Call loans		40			11,798
Policy loans		1,507,256			1,305,092
Loan secured by securities		—			84,601
Loans secured by real estate		2,709,710			2,709,360
Unsecured loans		214,246			112,694
Loans secured by third party guarantees		29,967			33,283
Other loans		2,308,150			2,177,393
Deferred loan origination fees and costs		17,306			16,120
Present value discount		—			(32	)
Allowance for credit loss		(31,156	)		(30,276	)

		6,755,519			6,420,033

Other receivables
Due from banks		356,498			489,467
Insurance accounts receivables		291,111			348,010
Accounts receivables		80,148			121,057
Accrued revenue		105,362			108,867
Notes receivables		410			335
Guarantee deposits		90,866			95,397
Deposits in court		2,318			2,418
Present value discount		(2,098	)		(2,979	)
Allowance for credit loss		(17,439	)		(17,362	)

		907,176			1,145,210

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Due from banks as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Deposit money		61,876		89,478
Derivatives margin account		26,963		8,699
Specific deposits		36		47
Guarantee deposits for securities borrowing transaction.		—		4,200
Due from banks		267,623		387,043

		356,498		489,467

Restricted due from banks as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014		Descriptions
Time deposits		9,863		87,936	Pledged by over-the-counter derivative agreement
		—		500	Micropayment and overdraft arrangement
Derivatives margin account		26,963		8,699	Exchange traded derivatives margin account
Specific deposits		64		48	Deposits for the opening checking accounts
Guarantee deposits for securities borrowing transaction.		—		4,200	Korea Securities Depository and others
Other deposits		—		107	Court deposit for provisional attatchment

		36,890		101,490

Insurance accounts receivables as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Insurance receivable		56,571		61,353
Due from agents		3,206		6,987
Co-insurance receivable		15,115		13,756
Receivables related to agency business		25,078		28,801
Reinsurance accounts receivable		88,561		110,530
Overseas reinsurance premiums receivable		101,136		125,156
Deposits on reinsurance treaty ceded		1,444		1,427

		291,111		348,010

Changes in allowance of credit loss of the loans and other receivables for the years ended December 31, 2015 and 2014, are as follows:


	2015						2014
(In millions of won)	Loans		Other Receivables		Total		Loans		Other Receivables		Total
Beginning balance	￦	30,276		17,362		47,638		35,031		19,658		54,689
Increase
Impairment loss		10,672		937		11,609		6,315		600		6,915
Recoveries from written-off loans		697		2		699		463		120		583
Decrease
Reversal		—		164		164		—		1,519		1,519
Written-offs		6,954		698		7,652		3,037		1,497		4,534
Others		1,111		—		1,111		5,505		—		5,505
Classified as assets held-for-sale		2,424		—		2,424		2,991		—		2,991

Ending balance	￦	31,156		17,439		48,595		30,276		17,362		47,638

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Changes in deferred loan origination fees and costs for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Beginning balance		16,120			16,012
Increase		13,780			12,085
Decrease		(12,594	)		(11,977	)

Ending balance		17,306			16,120

13. Investments in associates

Investments in associates as of December 31, 2015 and 2014, are as follows:


	Location	Industry	Date of financial statements		Owner-ship (%)
	Location	Industry	Date of financial statements		2015			2014
Kocref Cr-reit XI^1,2	Korea	Real estate rent		Sep 30		10.00	%		10.00	%
Kocref Cr-reit VIII	Korea	Real estate rent		—		—			6.67	%
KT-LIG ACE Private Equity Fund Co., Ltd	Korea	Financial investment		—		—			0.90	%
LIG Special Purpose Acquisition 2nd Co., Ltd^2,3	Korea	Financial investment		Dec 31		0.37	%		0.37	%
LIG-ES Special Purpose Acquisition Co., Ltd^2,3	Korea	Financial investment		Dec 31		0.66	%		—

Due to the inability to acquire the financial statements of the associate that has the same reporting date with those of the Parent Company, equity method is applied with the financial statements of the associate that was reported three months prior to the Parent Company’s financial statements. Significant transactions or events that occurred after the financial statements of the associate and before those of the Parent Company, were suitably adopted

²	Even if the ownership on the investee is less than 20%, as the Group has material influence over the associates by participating in decision-making processes, the equity method was applied.

³	Classified as disposal group held for sale as of December 31, 2015.

Changes in carrying value of investment in associate for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015
Investees	Owner- ship (%)			Beginning balance		Acquisition		Gain on valuation of equity- method investments¹		Changes in equity of equity- method investments		Dividends			Others³			Ending balance
Kocref Cr-reit XI		10.00	%		7,684		—		886		—		(1,134	)		—			7,436
Kocref Cr-reit VIII		—			2,895		—		—		—		—			(2,895	)		—
KT-LIG ACE Private Equity Fund Co., Ltd		—			229		—		1		—		—			(230	)		—
LIG Special Purpose Acquisition 2nd Co., Ltd²		0.37	%		19		—		5		—		—			(24	)		—
LIG-ES Special Purpose Acquisition Co., Ltd²		0.66	%		—		20		—		2		—			(22	)		—

					10,827		20		892		2		(1,134	)		(3,171	)		7,436

¹	Gain (loss) on valuation of equity-method investments is included in non-operating income (expenses) and discontinued operating income (expenses).

²	Classified as disposal group held-for-sale in 2015.

³	Impairment loss of disposal group held-for-sale, is included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


(In millions of won)	2014
Investees	Owner- ship (%)			Beginning balance		Acquisition		Gain on valuation of equity- method investments¹			Changes in equity of equity- method investments		Dividends			Others		Ending balance
Kocref Cr-reit XI		10.00	%		7,931		—		896			—		(1,143	)		—		7,684
Kocref Cr-reit VIII		6.67	%		2,736		—		134			25		—			—		2,895
KT-LIG ACE Private Equity Fund Co., Ltd		0.90	%		238		—		(9	)		—		—			—		229
LIG Special Purpose Acquisition 2nd Co., Ltd		0.37	%		—		10		(6	)		5		—			10		19

					10,905		10		1,015			30		(1,143	)		10		10,827

¹	Gain (loss) on valuation of equity-method investments is included in non-operating income (expenses) and discontinued operating income (expenses).

Summarized financial information of associates are as follows:


(In millions of won)	2015
Investees	Assets		Liabilities		Revenue		Profit or loss		The Group’s share of profit or loss
Kocref Cr-reit XI		208,619		128,346		23,850		8,859		886
LIG Special Purpose Acquisition 2nd Co., Ltd¹		5,926		688		113		35		5
LIG-ES Special Purpose Acquisition Co., Ltd¹		5,906		453		37		13		—

		220,451		129,487		24,000		8,907		891

¹	Classified as disposal group held for sale as of December 31, 2015.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


(In millions of won)	2014
Investees	Assets		Liabilities		Revenue		Profit (loss)			The Group’s share of profit (loss)
Kocref Cr-reit XI		211,928		129,639		23,599		8,959			896
Kocref Cr-reit VIII		65,092		24,640		4,920		1,970			134
LIG Special Purpose Acquisition 2nd Co., Ltd		25,546		71		9		(251	)		(9	)
LIG-ES Special Purpose Acquisition Co., Ltd		5,875		678		—		(123	)		(6	)

		308,441		155,028		28,528		10,555			1,015

14. Derivatives

(1) The notional amounts of derivatives as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Trading
Currency forwards		164,080		110,195
Currency swaps		—		—
Interest rate related		—		79,368
Other		6,593		6,714

		170,673		196,277

Fair value hedge
Currency forwards		2,726,071		2,091,937
Currency swaps		21,638		76,120

		2,747,709		2,168,057

Cash flow hedge
Currency swaps		150,022		168,478
Interest rate related		46,880		—

		196,902		168,478

(2) Fair value of derivative instruments as of December 31, 2015 and 2014, are as follows:


	2015				2014
(In millions of won)	Assets		Liabilities		Assets		Liabilities
Trading
Currency forwards		445		5,571		28		2,628
Currency swaps		—		—		—		—
Interest related		—		—		89		—
Other		166		1,431		1,132		2,182

		611		7,002		1,249		4,810

Hedge
Currency forwards		5,796		89,950		5,054		61,527
Currency swaps		5,030		5,386		27,544		1,884
Interest rate swaps		352		—		—		—

		11,178		95,336		32,598		63,411

		11,789		102,338		33,847		68,221

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(3) Gains and losses on valuation of derivatives for the years ended December 31, 2015 and 2014, are as follows:


	2015						2014
(In millions of won)	Gain			Loss			Gain		Loss
Profit or loss
Currency forwards		6,795			94,148			1,828		67,606
Currency swaps		1			8,957			4,226		8,278
Stock related		3,731			617			7		1,291
Interest related		149			56			8		106
Other		751			779			169		1,902
Credit risk adjustment		34			92			200		6

		11,461			104,649			6,438		79,189

Accumulated other comprehensive income
Currency swaps		(675	)		(253	)		313		688
Interest rate related		267			—			—		—

		(408	)		(253	)		313		688

		11,053			104,902			6,751		79,877

¹	Income tax effects related to gains and losses on valuation of derivatives classified as accumulated other comprehensive income amount to ￦212 million.

²	Income tax effects related to gains and losses on valuation of derivatives classified as accumulated other comprehensive income amount to ￦423 million.

(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 years ended December 31, 2015 and 2014, are as follows:


	2015				2014
(In millions of won)	Gain		Loss		Gain		Loss
Hedging instrument
Currency forwards		5,795		89,248		1,828		64,966
Currency swaps		—		1,452		—		2,847

		5,795		90,700		1,828		67,813

Hedged item
Available-for-sale financial assets		79,017		5,407		54,756		1,684
Held-to-maturity financial assets		1,294		—		772		—
Loans		1,452		—		630		—
Others receivables		8,937		428		11,655		144

		90,700		5,835		67,813		1,828

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

①	Details of expected cash flow of cash flow hedge accounting as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	1 month or less		3 months or less		1 year or less		5 years or less			More than 5 years		Total
Cash flow of derivatives settled in net amounts		204		74		305		(232	)		—		351
Cash inflow of derivatives settled in gross amounts		67		25,395		37,898		94,108			6,955		164,423
Cash outflow of derivatives settled in gross amounts		53		20,478		39,255		96,384			7,140		163,310

	2014
(In millions of won)	1 month or less		3 months or less		1 year or less		5 years or less			More than 5 years		Total
Cash inflow of derivatives settled in gross amounts		84		41,128		63,248		94,744			7,371		206,575
Cash outflow of derivatives settled in gross amounts		47		31,901		56,101		85,453			7,078		180,580

②

Regarding cash flow hedges, the expected maximum period exposed to risk of change in cash flow is up to April 13, 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 ￦278 million in profit and ￦52 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 years ended December 31, 2015 and 2014, are as follows:


	2015						2014
(In millions of won)	Realized			Ineffective			Realized			Ineffective
Currency swaps		(7,039	)		(29	)		(1,144	)		—

15. Reinsurance assets

Changes in reinsurance assets for the years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Beginning balance		Net increase (decrease)¹			Ending balance
Reserve for outstanding claims
General insurance		568,434		(103,096	)		465,338
Automobile insurance		25,262		(8,443	)		16,819
Long-term insurance		54,746		7,832			62,578

		648,442		(103,707	)		544,735

Unearned premium reserve
General insurance		220,719		(5,850	)		214,869
Automobile insurance		26,583		(9,289	)		17,294

		247,302		(15,139	)		232,163

Total reinsurance assets		895,744		(118,846	)		776,898
Allowance for impairment		787		(123	)		664

Total reinsurance assets, net		894,957		(118,723	)		776,234

¹	Gains or losses on foreign currency translation of foreign operations, ￦11,706 million, is included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Beginning balance		Net increase (decrease)²			Ending balance
Reserve for outstanding claims
General insurance		441,534		126,900			568,434
Automobile insurance		17,208		8,054			25,262
Long-term insurance		39,845		14,901			54,746

		498,587		149,855			648,442

Unearned premium reserve
General insurance		227,953		(7,234	)		220,719
Automobile insurance		60,613		(34,030	)		26,583

		288,566		(41,264	)		247,302

Total reinsurance assets		787,153		108,591			895,744
Allowance for impairment		1,338		(551	)		787

Total reinsurance assets, net		785,815		109,142			894,957

¹	Gains or losses on foreign currency translation of foreign operations, ￦6,835 million, is included.

16. Investment property

Investment property as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Land
Acquisition costs		112,197			92,444
Building
Acquisition costs		279,012			272,667
Accumulated depreciation		(57,473	)		(49,364	)

		333,736			315,747

Changes in investment property for the years ended December 31, 2015 and 2014 are as follows:


	2015
(In millions of won)	Beginning balance		Depreciation¹			Transfer from(to) property and equipment		Ending balance
Land		92,444		—			19,753		112,197
Building		223,303		(6,912	)		5,148		221,539

		315,747		(6,912	)		24,901		333,736

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

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Beginning balance		Depreciation¹			Transfer from(to) property and equipment			Ending balance
Land		117,004		—			(24,560	)		92,444
Building		243,087		(7,068	)		(12,716	)		223,303

		360,091		(7,068	)		(37,276	)		315,747

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

Investment properties are appraised by independent certified public appraisers. The valuation was based on recent exchange in market under the conditions of arm’s length transactions. Fair value of investment property as of December 31, 2015 and 2014, are as follows:


	2015					2014
(In millions of won)	Land		Building			Land		Building
Fair value		119,891		216,170			114,823		216,178
Carrying value		112,197		221,539			92,444		223,303

Difference		7,694		(5,369	)		22,379		(7,125	)

Rent income and expense on investment property for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Rent income		20,678		20,920
Operating expenses related to investment property		15,886		16,595

17. Property and equipment

Property and equipment as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Acquisition costs		Accumulated depreciation		Carrying value
Land		186,278		—		186,278
Building		662,325		136,005		526,320
Structure		745		219		526
Equipment		165,070		117,961		47,109
Vehicles		737		461		276
Others		1,226		857		369

		1,016,381		255,503		760,878


	2014
(In millions of won)	Acquisition costs		Accumulated depreciation		Carrying value
Land		206,154		—		206,154
Building		669,527		120,424		549,103
Structure		745		170		575
Equipment		171,674		118,447		53,227
Vehicles		718		600		118
Others		3,239		2,437		802

		1,052,057		242,078		809,979

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Changes in the property and equipment for the years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Beginning balance		Acquisition		Disposal			Depreciation ¹			Transfer from(to) investment			Others ²		Impairment loss³			Ending balance
Land		206,154		7		(131	)		—			(19,752	)		—		—			186,278
Building		549,103		684		(1,472	)		(16,846	)		(5,149	)		—		—			526,320
Structure		575		—		—			(49	)		—			—		—			526
Equipment		53,227		12,612		(425	)		(17,399	)		—			28		(934	)		47,109
Vehicles		118		242		(5	)		(79	)		—			—		—			276
Others		802		—		(180	)		(550	)		—			338		(41	)		369

		809,979		13,545		(2,213	)		(34,923	)		(24,901	)		366		(975	)		760,878

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

²	Gains or losses on foreign currency translation due to change in exchange rate in foreign operations and transfer from other accounts are included.

³	Impairment loss on disposal group held for sale is included in profit from discontinued operations.


	2014
(In millions of won)	Beginning balance		Acquisition		Disposal			Depreciation ¹			Transfer from(to) investment		Others²			Transfer from assets held for sale			Ending balance
Land		182,644		84		(276	)		—			24,560		—			(858	)		206,154
Building		556,831		414		(678	)		(16,774	)		12,716		(2,723	)		(683	)		549,103
Structure		625		—		—			(50	)		—		—			—			575
Equipment		59,573		12,476		(124	)		(18,711	)		—		13			—			53,227
Vehicles		267		12		(22	)		(140	)		—		1			—			118
Others		1,197		30		(92	)		(788	)		—		455			—			802

		801,137		13,016		(1,192	)		(36,463	)		37,276		(2,254	)		(1,541	)		809,979

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

²	Gains or losses on foreign currency translation due to change in exchange rate in foreign operations and transfer from other accounts are included.

18. Insured assets

The details of buildings and equipment insured against fire and other casualty as of December 31, 2015 and 2014, are summarized as follows:


	2015
(In millions of won)	Amount insured		Insurance company
Building ¹		1,071,903	Samsung Fire Marine Insurance Co., Ltd
Equipment		120,278

		1,192,181

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Amount insured		Insurance company
Building ¹		1,084,751	Samsung Fire Marine Insurance Co., Ltd
Equipment		153,878

		1,238,629

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

Beside the assets above, the Group subscribes directors and officers liability insurance and gas accidents liability insurance from Samsung Fire & Marine Insurance Co., Ltd The Group also subscribes performance guarantee insurance etc. from Seoul Guarantee Insurance Co., Ltd.

19. Intangible assets

Intangible assets as of December 31, 2015 and 2014, were as follows:


	2015
(In millions of won)	Acquisition costs		Accumulated amortization		Accumulated impairment		Carrying value
Membership		30,820		—		11,167		19,653
Software		43,569		34,207		—		9,362
Development cost		123,412		111,274		—		12,138
Others		38		—		—		38

		197,839		145,481		11,167		41,191


	2014
(In millions of won)	Acquisition costs		Accumulated amortization		Accumulated impairment		Carrying value
Membership		35,749		—		14,719		21,030
Software		43,841		33,018		—		10,823
Development cost		128,322		112,004		—		16,318
Others		3,057		—		—		3,057

		210,969		145,022		14,719		51,228

Changes in the intangible assets for the years ended December 31, 2015 and 2014, were as follows:


	2015
(In millions of won)	Beginning balance		Acquisitions		Disposal			Amortization¹			Impairment²			Others³		Ending balance
Membership		21,030		3,290		(2,088	)		—			(2,579	)		—		19,653
Software		10,823		3,458		(15	)		(4,337	)		(576	)		9		9,362
Development cost		16,318		2,725		—			(6,422	)		(1,076	)		593		12,138
Other		3,057		38		—			—			(3,057	)		—		38

		51,228		9,511		(2,103	)		(10,759	)		(7,288	)		602		41,191

¹	Amortization of intangible assets is included in other expenses.

²	Impairment loss on intangible assets are included in non-operating expenses, and impairment loss related to disposal asset group held-for-sale that amounts to ￦5,968 million, is included in profit from discontinued operations.

³	Gain (loss) on foreign currency translation due to change in exchange rate in foreign subsidiaries and transfer from other accounts are included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Beginning balance		Acquisitions		Disposal			Amortization¹			Impairment²			Others³		Ending balance
Membership		30,840		91		(4,788	)		—			(5,113	)		—		21,030
Software		12,634		3,456		—			(5,276	)		—			9		10,823
Development cost		26,894		2,920		—			(13,547	)		—			51		16,318
Other		3,057		—		—			—			—			—		3,057

		73,425		6,467		(4,788	)		(18,823	)		(5,113	)		60		51,228

¹	Amortization of intangible assets is included in other expenses.

²	Impairment loss on intangible assets are included in non-operating expenses.

³	Gain (loss) on foreign currency translation due to change in exchange rate in foreign subsidiaries and transfer from other accounts are included.

Intangible assets with indefinite useful life as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Other intangible assets		38		3,057
Condominium memberships		5,647		5,066
Golf memberships		13,646		15,923
Others		360		41

		19,691		24,087

20. Disposal group held for sale and profit or loss from discontinued operations

The Group decided to sell LIG Investment & Securities Co., Ltd on December 22, 2015, with approval of the board of directors. Therefore, the assets and liabilities related to LIG Investment & Securities Co., Ltd are recognized as disposal group classified as a disposed group classified held for sale, and the profit or loss of the related operations are presented as discontinued operations as of December 31, 2015. The transaction is expected to be completed by April 2016.

(1) Details of disposal group held for sale as of December 31, 2015, are as follow:


(In millions of won)	2015
Assets of disposal group classified as held for sale
Cash and cash equivalents		11,276
Financial assets at fair value through profit or loss		835,675
Available-for-sale financial assets		22,310
Loans and receivables		170,260
Deferred tax assets		367

		1,039,888

Liabilities of disposal group classified as held for sale
Deposits		122,511
Financial liabilities at fair value through profit or loss		249,667
Debts		459,876
Other financial liabilities		47,258
Defined benefit liabilities		1,110
Other liabilities		4,048

		884,470

Accumulated other comprehensive income of disposal group
Changes in value of available-for-sale financial assets		1,481
Share of other comprehensive income of associates		5
Remeasurement factors of defined benefit liabilities		48

		1,534

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(2) Details of profit or loss from discontinued operations of the Group for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Operating income		138,006			108,292
Interest income		22,311			20,939
Dividend income		55			81
Gains from valuation and disposal of securities		64,120			45,177
Gains from valuation and disposal of loans and receivables		225			—
Gain from derivatives		16,058			10,691
Other income		35,237			31,404
Operating expenses		127,438			105,598
Interest expense		9,335			9,997
Loss from valuation and disposal of securities		48,568			29,318
Loss from valuation and disposal of loans and receivables		257			2,124
Loss from derivatives		20,075			12,042
Other expense		49,203			52,117
Operating profit		10,568			2,694
Non-operating income and expenses		808			(2,861	)
Non-operating income		1,036			351
Non-operating expense		228			3,212
Income tax expenses		2,914			555
Income of LIG Investment & Securities, Co., Ltd		8,462			(722	)
Impairment loss of disposal group held for sale		(37,788	)		—
Loss from discontinued operations		(29,326	)		(722	)

(3) Cash flows from discontinued operations for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Operating activities		(170,429	)		131,578
Investing activities		6,950			(5,698	)
Financing activities		164,483			(122,703	)

		1,004			3,177

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

21. Deferred acquisition costs

Changes in the deferred acquisition costs for the years ended December 31, 2015 and 2014, are as follows.


	2015
	Beginning balance		Expenditure						Decrease		Ending balance
(In millions of won)	Beginning balance		Total		Expensed		Deferred		Decrease		Ending balance
Pension		64,080		6,064		2,058		4,006		24,235		43,851
Long-term insurance		1,542,512		741,984		43,680		698,304		629,813		1,611,003

		1,606,592		748,048		45,738		702,310		654,048		1,654,854


	2014
	Beginning balance		Expenditure						Decrease		Ending balance
(In millions of won)	Beginning balance		Total		Expensed		Deferred		Decrease		Ending balance
Pension		90,792		6,332		2,268		4,064		30,776		64,080
Long-term insurance		1,520,494		666,178		30,370		635,809		613,791		1,542,512

		1,611,286		672,510		32,638		639,873		644,567		1,606,592

22. Other assets

Other assets as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Compensation receivables		31,857		32,642
Prepaid expenses		11,562		6,767
Advance payments		5,191		2,152
Others		31		58

		48,641		41,619

Changes in the compensation receivables for the years ended December 31, 2015 and 2014, are as follows:


	2015							2014
(In millions of won)	Beginning balance		Increase (Decrease)			Ending balance		Beginning balance		Increase (Decrease)			Ending balance
General insurance		6,236		(2,367	)		3,869		5,233		1,003			6,236
Automobile insurance		24,488		1,139			25,627		26,962		(2,474	)		24,488
Assumed reinsurance guarantee		—		—			—		33		(33	)		—
Long-term insurance		1,918		443			2,361		1,704		214			1,918

		32,642		(785	)		31,857		33,932		(1,290	)		32,642

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

23.

Assets provided as collateral

Assets provided as collateral as of December 31, 2015 and 2014, are as follows:


(In millions of won)	Collateral provided to	2015		2014		Remark
Cash equivalents	The Korea Securities Finance Corporation		3,100		4,200		Deposits for stock borrowing transactions
Stocks	The Korea Securities Finance Corporation		8,291		—		Stocks borrowing guarantees
Government and public bonds	Industrial Bank and 7 others		406,898		188,996		Swap contract
	ANZ Bank		47,578		43,933		Reinsurance contract
	The Korea Securities Finance Corporation		237,205		133,877		Bond borrowing transactions
	Korea Securities Depository		—		39,575		Bond borrowing transactions
	Korea Securities Depository		361,154		284,824		Repurchase agreements
Company bonds	Korea Exchange, Inc.		12,149		17,562		Pledged by over-the-counter derivative agreement
Due from bank	Shinhan Bank		—		87,936
Derivatives margin account	Hana Daehan Investment and Securities Co., Ltd		7,736		3,743		Exchange traded derivatives margin account

			1,084,111		804,646

¹	Assets pledged as collateral of LIG Investment & Securities Co., Ltd, are included in disposal group held for sale.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

24. Insurance liabilities

(1) Changes in the insurance liabilities for the years ended December 31, 2015 and 2014 were as follows:


	2015
(In millions of won)	Beginning balance		Net increase (decrease) ¹			Ending balance
Long-term insurance premium reserve:
Long-term insurance contract		15,202,111		1,818,052			17,020,163
Long-term investment contract		118,689		(3,627	)		115,062

		15,320,800		1,814,425			17,135,225

Reserve for outstanding claims:
General insurance		949,826		(45,216	)		904,610
Automobile insurance		364,767		32,727			397,494
Long-term insurance		580,602		71,297			651,899

		1,895,195		58,808			1,954,003

Unearned premium reserve:
General insurance		342,536		(456	)		342,080
Automobile insurance		802,479		79,314			881,793
Long-term insurance		25,759		(1,470	)		24,289

		1,170,774		77,388			1,248,162

Reserve for participating policyholders’ dividends on long-term insurance		69,591		6,046			75,637
Excess participating policyholders’ dividends reserve on long-term insurance		15,173		4,715			19,888
Reserve for compensation for losses on dividend-paying insurance contracts		13,140		1,935			15,075

		18,484,673		1,963,317			20,447,990

¹	The amounts of net increase or decrease in insurance liabilities include the effects from foreign currencies translation at foreign operations, which is ￦21,218 million and the decrease in liabilities about investment contract of ￦6,847 million.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Beginning balance		Net increase (decrease) ¹			Ending balance
Long-term insurance premium reserve:
Long-term insurance contract		13,242,751		1,959,360			15,202,111
Long-term investment contract		126,077		(7,388	)		118,689

		13,368,828		1,951,972			15,320,800

Reserve for outstanding claims:
General insurance		722,003		227,823			949,826
Automobile insurance		344,829		19,938			364,767
Long-term insurance		465,787		114,815			580,602

		1,532,619		362,576			1,895,195

Unearned premium reserve:
General insurance		393,339		(50,803	)		342,536
Automobile insurance		714,620		87,859			802,479
Long-term insurance		19,998		5,761			25,759

		1,127,957		42,817			1,170,774

Reserve for participating policyholders’ dividends on long-term insurance		63,722		5,869			69,591
Excess participating policyholders’ dividends reserve on long-term insurance		8,248		6,925			15,173
Reserve for compensation for losses on dividend-paying insurance contracts		8,743		4,397			13,140

		16,110,117		2,374,556			18,484,673

¹	The amounts of net increase or decrease in insurance liabilities include the effects from foreign currencies translation at foreign operations, which is ￦5,572 million and the decrease in liabilities about investment contract of ￦10,834 million.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(2) Liability adequacy test

(a) Assumptions for the insurance liability adequacy test as of December 31, 2015, is as follows:


		Basis
Long-term insurance
Discount rate		Future return rate on invested asset based on past investment performance and future estimation
Rate of insurance operating expenses		Expected rate by product type based on the past 1 year experience adjusted for the future Company’s insurance operating expenses policy
Rate of persistency		Rate of persistent insurance contract for the last 5 years
Rate of claim payment		Ratio of claim payment to the anticipated risk premium of the insurer for the last 5 years
General insurance
Rate of insurance operating expenses		Individual event ratio of actual insurance operating expenses to earned premium for the last 1 year
Rate of claim survey expenses paid		Individual event ratio of claim survey expenses paid to claim payment for the last 3 years
Rate of claim payment		Individual event ratio of actual claim payment to earned premium for the last 5 years
Automobile insurance
Rate of insurance operating expenses		Individual collateral ratio of actual insurance operating expenses to earned premium for the last 1 year
Rate of claim survey expenses paid		Individual collateral ratio of claim survey expenses paid to claim payment for the last 3 years
Rate of claim payment		Individual collateral ratio of actual claim payment to earned premium for the last 5 years

(b) The results of liability adequacy test as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Recognized liabilities ¹		Estimated adequate liabilities		Shortfall (surplus)
General insurance		388,796		333,409		(55,387	)
Automobile insurance		919,068		884,676		(34,392	)
Long-term insurance		15,365,938		12,862,146		(2,503,792	)

		16,673,802		14,080,231		(2,593,571	)


	2014
(In millions of won)	Recognized liabilities ¹		Estimated adequate liabilities		Shortfall (surplus)
General insurance		387,263		332,596		(54,667	)
Automobile insurance		837,667		819,181		(18,486	)
Long-term insurance		13,714,810		11,299,075		(2,415,735	)

		14,939,740		12,450,852		(2,488,888	)

¹	For long-term insurance, it is an amount after deduction of the deferred acquisition costs from insurance premium reserve. For general insurance and automobile insurance, it is an amount including the unearned premium based on original insurance.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

25. Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Derivatives liabilities for trading purpose
Related to currency		5,571		2,628
Others		1,431		2,182
Securities sold		—		184,858

		7,002		189,668

26. Deposits

Details of deposits as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Brokerage deposits		—		25,970
Exchange-traded derivatives deposits		—		51,674
Savings deposits		—		8
Collective investment securities investors deposits		—		17,845

		—		95,497

27. Debts

Details of debts as of December 31, 2015 and 2014, are as follows:


(In millions of won)	Lender	Annual interest rate (%)		2015		2014
Repurchase agreements	Individuals, Corporations		—		—		235,302
Borrowings	The Korea Securities Finance Corporation		—		—		60,000

					—		295,302

28. Other financial liabilities

Other financial liabilities as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Insurance accounts payable		378,756		354,078
Accrued expenses		91,161		98,444
Accounts payable		16,163		49,390
Deposit received		11,835		24,272
Security deposit		26,245		27,284
Non-controlling interests		4,152		—

		528,312		553,468

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Insurance accounts payable as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Claims payable		7,016		8,045
Due to agents		80,252		75,295
Premiums refund payable		6,051		2,546
Coinsurance payable		646		546
Payables related to agency business		27,328		21,303
Reinsurance accounts payable		104,014		102,236
Overseas reinsurance premiums payable		116,870		117,842
Deposits on reinsurance treaty ceded		36,579		26,265

		378,756		354,078

29. Provisions

Provisions as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Asset retirement obligation		832		922
Dormant insurance claims liabilities		30,629		27,613
Others		15,817		456

		47,278		28,991

Changes in the provisions for the years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Beginning balance		Occurrence		Used			Increase ¹		Reversal ¹			Ending balance
Asset retirement obligation		922		339		(76	)		—		(353	)		832
Dormant insurance claims liabilities		27,613		—		—			3,016		—			30,629
Others		456		—		—			15,561		(200	)		15,817

		28,991		339		(76	)		18,577		(553	)		47,278

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


	2014
(In millions of won)	Beginning balance		Occurrence		Used			Increase ¹		Reversal ¹			Ending balance
Asset retirement obligation		1,035		454		(45	)		1		(523	)		922
Dormant insurance claims liabilities		21,901		—		—			5,712		—			27,613
Others		256		200		—			—		—			456

		23,192		654		(45	)		5,713		(523	)		28,991

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

30. Liability for defined benefit plans and share-based payments

(1) Assets and liabilities for defined benefit plans as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Present value of defined benefit obligation		269,391			243,651
Fair value of plan assets		(165,993	)		(158,905	)

Defined benefit liabilities in the consolidated financial position		103,398			84,746

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(2) Changes in the present value of defined benefit obligation for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Beginning balance		243,651			211,450
Current service cost		27,344			26,426
Past service cost		9,341			—
Interest cost		7,234			10,316
Remeasurements gain (loss)		(4,395	)		9,390
Benefits paid		(12,142	)		(13,931	)
Others		(532	)		—
Effect of disposal group held for sale		(1,110	)		—

Ending balance		269,391			243,651

(3) Changes in the fair value of plan assets for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Beginning balance		158,905			133,794
Interest income		4,853			6,492
Remeasurements loss		(1,661	)		(2,905	)
Contributions paid		18,769			28,202
Benefits paid		(10,490	)		(6,678	)
Others		(4,483	)		—

Ending balance		165,993			158,905

(4) Profit or loss on liability for defined benefit plans for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Current service cost		27,344			26,426
Past service cost		9,341			—
Interest cost		7,234			10,316
Interest income		(4,853	)		(6,492	)

		39,066			30,250

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) Remeasurements recognized as other comprehensive income or loss for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Remeasurement gain (loss)
Return on plan assets		(1,662	)		(2,905	)
Change in demographic assumptions		(35	)		(8,255	)
Change in financial assumptions		3,024			(9,853	)
Experience adjustment		1,407			8,718

		2,734			(12,295	)
Effect of tax		(669	)		2,976

Remeasurement gain (loss) after the tax effect		2,065			(9,319	)

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(6) Details of plan assets as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015						2014
	Assets quoted in an active market		Assets not quoted in an active market		Total		Assets quoted in an active market		Assets not quoted in an active market		Total
Time deposit		—		160,283		160,283		—		148,318		148,318
Debt securities		—		5,500		5,500		—		9,029		9,029
Others		—		210		210		—		1,558		1,558

		—		165,993		165,993		—		158,905		158,905

(7) Actuarial assumptions as of December 31, 2015 and 2014, are as follows:


	2015			2014			Descriptions
Discount rate		2.60	%		3.11	%	AAA Corporate bond yields
Rate of salary increase		5.20	%		5.80	%	Average for last 3 years

(8) Sensitivity analysis

(a) Discount rate

(In millions of won)

2015

Present value when
the rate rises 0.5%P
basis points

Present value when
the rate falls 0.5%P
basis points

Present value of liability for defined benefit plans

269,391

251,364

291,607

(b) Rate of salary increase

(In millions of won)

2015

Present value when
the rate rises 0.5%P
basis points

Present value when
the rate falls 0.5%P
basis points

Present value of liability for defined benefit plans

269,391

290,917

251,776

(9) The weighted average maturities of the defined benefit obligation as of December 31, 2015, is 15.32 years (2014: 17.02 years).

(10) The amounts recognized as expenses related to defined contribution plan for the years ended December, 31, 2015 and 2014 are ￦7,531 million and ￦7,447 million, respectively.

(11) Maturity analysis of undiscounted pension benefits payable as of December 31, 2015, is as follows:


(In millions of Korean won)	Less than 1 year		1~2 years		2~5 years		5~10 years		More than 10 years		Total
Benefits payable		5,450		5,807		26,360		79,262		1,076,460		1,193,339

(12) 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.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(a) The details of stock grants related to long-term performance as of December 31, 2015, are as follows:

(In shares)

Grant Date

Granted

shares¹

Vesting Condition

1st

June 24, 2015

92,503

Services period : 2 years ^2,3

¹	Granted shares represent the total number of shares initially granted to directors and employees that have residual shares at the end of reporting.

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

Among the granted amounts, actually compensated amounts are determined 30% by Relative TSR, 40% by targeted performance result, 30% by financial results from the Parent Company. As for certain number of shares, half by Relative TSR, the other by targeted performance results and financial result of the Parent Company. As for other number of shares, it is determined 30% by Relative TSR and 70% by targeted performance result and financial result of the Parent Company.

2) The details of stock grants related to short-term performance as of December 31, 2015, are as follows:


(In shares)	Grant date	Granted shares¹		Vesting condition
Stock granted on 2015	June 24, 2015		24,097	Proportional to service period

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

3) Stock grants are measured at fair value using the Monte Carlo Simulation Model and assumptions used in determining the fair value as of December 31, 2015, are as follows:

(In Korean won)

Expected
exercise period
(years)

Risk free rate (%)

Fair value

(Market performance
condition)

Fair value

(Non-market
performance
condition)

Linked to long-term performance

￦

0.00 ~ 1.48

1.63%~1.64%

28,570~34,180

32,330~34,180

Linked to short-term performance

Stock granted in 2015

1.00 ~ 3.00

1.72%

—

33,200~33,213

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 December 31, 2015, was used for the underlying asset price. Additionally, the average three-year historical dividend rate was used as the expected dividend rate.

31. Other liabilities

Other liabilities as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Unearned revenues		771		1,435
Advances from clients		13,000		—
Advance premiums received		19,178		22,939
Withholdings		6,413		8,718
Other taxes payable		1,514		680
Others		1,362		1,418

		42,238		35,190

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

32. Assets and liabilities denominated in foreign currencies

Assets and liabilities denominated in foreign currencies as of December 31, 2015 and 2014, 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.


			2015				2014
	Currency		Foreign currency		Equivalent in Korean won		Foreign currency		Equivalent in Korean won
Financial assets
Cash and cash equivalents		USD		113,912		133,504		37,989		41,758
		AUD		42		36		3		3
		EUR		133		170		677		905
		SGD		214		177		328		273
		JPY		17		0		15,727		145
		IDR		16,153,220		1,373		2,070,057		182
		GBP		12		21		11		18
		CNY		50,745		9,057		54,676		9,667
Financial assets at fair value through profit or loss		USD		189,408		221,986		113,812		125,102
Financial assets at fair value through profit or loss		IDR		425,721		36		2,436,829		215
Available-for-sale financial assets		USD		2,516,961		2,949,879		1,950,018		2,143,460
		EUR		3,487		4,466		3,769		5,038
		HKD		7,026		1,062		—		—
		CNY		23,799		4,248		—		—
		IDR		395,610		34		395,610		35
Held-to-maturity financial assets		USD		40,000		46,880		40,000		43,968
Held-to-maturity financial assets		IDR		27,001,000		2,295		20,001,000		1,766
Loans		USD		54,547		63,929		19,250		21,160
		IDR		1,116,723		95		725,783		64
		JPY		2,000,000		19,440		5,000,000		46,007
Other receivables		AUD		105		90		195		175
		USD		219,579		257,347		363,555		399,620
		EUR		425		544		630		842
		JPY		32,680		318		9,012		83
		GBP		229		398		1,646		2,816
		VND		1,764,328		92		988,228		51
		IDR		157,862,651		13,418		73,649,714		6,503
		CNY		334,894		59,772		284,827		50,360

Total assets		AUD		147		126		198		178
		EUR		4,045		5,180		5,076		6,785
		GBP		241		419		1,657		2,834
		CNY		409,438		73,077		339,503		60,027
		VND		1,764,328		92		988,228		51
		JPY		2,032,697		19,758		5,024,739		46,235
		USD		3,134,407		3,673,525		2,524,624		2,775,068
		IDR		202,954,925		17,251		99,278,993		8,765
		SGD		214		177		328		273
		HKD		7,026		1,062		—		—

Financial liabilities
Other financial liabilities		USD		17,049		19,981		26,252		28,856
		EUR		804		1,030		1,233		1,648
		GBP		175		304		2		4
		IDR		4,005,806		340		10,512,254		928
		CNY		86,340		15,410		82,949		14,666
		JPY		6,536		64		12		—
		SGD		—		—		487		405

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

33. Equity

Equity as of December 31, 2015 and 2014, are as follows:


(In millions of won)		2015			2014
Capital stock	Common stock		30,000			30,000
Capital surplus	Share premium		49,712			49,712
	Gain on disposal of treasury stocks		131,409			3

			181,121			49,715

	Treasury stocks		—			(56,600	)
Capital adjustments	Others		(9	)		(7	)
Capital adjustments
			(9	)		(56,607	)

Accumulated other comprehensive income	Net change in fair value of available-for-sale financial assets		265,887			224,361
	Net change in fair value of cash flow hedges		663			1,324
	Other comprehensive income related to investment in associates		—			23
	Foreign currency translation differences for foreign operations		(11,665	)		(7,595	)
	Revaluation of property and equipment		78,053			78,053
	Remeasurements of defined benefit plans		(58,352	)		(60,366	)
	Other comprehensive income arising from separate account		11,071			14,516

			285,657			250,316

Accumulated other comprehensive income of disposal group			1,534			—

Retained earnings	Legal reserve¹		15,500			15,500
	Other reserve		758,391			648,391
	Regulatory reserve for credit loss²		70,775			57,857
	Emergency risk reserve²		585,162			574,963
	Retained earnings before appropriation		152,556			147,042

			1,582,384			1,443,753

Non-controlling interests			30,553			36,409

			2,111,240			1,753,586

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 Moreover, in accordance with the Article 9-4 of Electronic Financial Transactions Act and the Article 5-1 of Electronic Financial Transactions Regulation, to insure the legal responsibility of the Group in case the customers of the Group are damaged due to an incident caused by the forgery or alteration of the means of access or caused in the course of electronically transmitting of processing the settlement of a contract or a transaction request. The Group accumulates reserves for electronical compensation for electronical financial accidents that amount to ￦500 million

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

Capital stock as of December 31, 2015 and 2014, are as follows:


	2015		2014
Number of shares authorized		200,000,000		200,000,000
Par value per share (in Korean won)		500		500
Number of shares issued		60,000,000		60,000,000

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Details in treasury stocks for the years ended December 31, 2015 and 2014, are as follows:


	2015						2014
(In millions of won)	Number of shares			Book value			Number of shares		Book value
Beginning balance		8,290,179			56,600			8,290,179		56,600
Decrease¹		(8,290,179	)		(56,600	)		—		—

Ending balance		—			—			8,290,179		56,600

¹	Disposed to KB Financial Group for capital expansion and RBC ratio improvement

Changes in accumulated other comprehensive income for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015
(In millions of won)	Valuation gain (loss) on available-for- sale financial assets			Valuation gain (loss) on cash flow hedges			Valuation gain (loss) on investments in associates			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		Total¹
Beginning balance		224,361			1,324			23			(7,595	)		(60,366	)		14,516			78,053		250,316
Net change due to valuation		59,595			—			2			—			2,731			(1,583	)		—		60,745
Change due to impairment and disposal		(2,969	)		(465	)		(26	)		—			—			(2,962	)		—		(6,422	)
Effect of hedge accounting		—			(407	)		—			—			—			—			—		(407	)
Effect of foreign currency movements		227			—			—			(4,070	)		—			—			—		(3,843	)
Effect of deferred tax		(13,846	)		211			6			—			(669	)		1,100			—		(13,198	)
Accumulated other comprehensive income of disposal group		(1,481	)		—			(5	)		—			(48	)		—			—		(1,534	)

Ending balance		265,887			663			—			(11,665	)		(58,352	)		11,071			78,053		285,657

¹	Non-controlling interest are not included.


(In millions of won)	2014
(In millions of won)	Valuation gain (loss) on available-for-sale financial assets			Valuation gain (loss) on cash flow hedges			Valuation gain (loss) on investments in associates			Foreign currency translation differences for foreign operations			Remeasure- ments of defined benefit plans			Other comprehensive income arising from separate account			Revaluation of property FOR and equipment			Total¹
Beginning balance		62,570			322			—			(5,698	)		(51,038	)		197			94,926			101,279
Net change due to valuation		224,040			—			—			—			(12,307	)		18,279			—			230,012
Change due to impairment and disposal		(10,129	)		(1,143	)		—			—			—			612			(21,633	)		(32,293	)
Effect of hedge accounting		—			2,465			—			—			—			—			—			2,465
Effect of foreign currency movements		(388	)		—			—			(1,897	)		—			—			—			(2,285	)
Changes in equity		—			—			30			—			—			—			—			30
Deferred income tax effect		(51,732	)		(320	)		(7	)		—			2,979			(4,572	)		4,760			(48,892	)

Ending balance		224,361			1,324			23			(7,595	)		(60,366	)		14,516			78,053			250,316

¹	Non-controlling interest are not included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Regulatory reserve for credit loss as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Regulatory reserve for credit loss		70,775			57,857
Estimated reversal of regulatory reserve for credit loss		(14,032	)		12,918

		56,743			70,775

Profit for the period adjusted by regulatory reserve for credit loss for the years ended December 31, 2015 and 2014 were as follows:


(In millions of won)	2015			2014
Profit for the period		159,348			109,229
Provision for (reversal of) regulatory reserve for credit loss		(14,032	)		12,918

Profit for the period adjusted by regulatory reserve for credit loss¹		173,380			96,311

Earnings per share adjusted by regulatory reserve for credit loss (in won)		3,291			1,863

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

Emergency risk reserve in the Regulation on Supervision of Insurance Business as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Emergency risk reserve		585,162		574,963
Estimated emergency risk reserve to be provided		34,526		10,199

		619,688		585,162

Profit for the period adjusted by emergency risk reserve for the years ended December 31, 2015 and 2014, were as follows:


(In millions of won)	2015		2014
Profit for the period		159,348		109,229
Provision for emergency risk reserve for loan loss		34,526		10,199

Profit for the period adjusted by emergency risk reserve¹		124,822		99,030

Earnings per share adjusted by emergency risk reserve (in won)		2,369		1,915

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.

34. Premium Income

Premium income for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015
	General insurance			Automobile insurance			Long-term and individual insurance			Total
Direct premium written by the Group		911,234			1,833,723			6,407,620			9,152,577
Assumed reinsurance premium		78,584			—			—			78,584
Refund of surrender value		(19,960	)		(86,318	)		(540	)		(106,818	)

		969,858			1,747,405			6,407,080			9,124,343

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


(In millions of won)	2014
	General insurance			Automobile insurance			Long-term and individual insurance			Total
Direct premium written by the Group		951,975			1,715,745			6,203,647			8,871,367
Assumed reinsurance premium		67,565			—			—			67,565
Refund of surrender value		(23,314	)		(77,564	)		(564	)		(101,442	)

		996,226			1,638,181			6,203,083			8,837,490

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

Insurance claims paid, dividend expenses and refunds of surrender value for the years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	General insurance			Automobile insurance			Long-term and Individual insurance			Total
Insurance claims paid
Direct premium written by the Group		735,854			1,379,144			1,207,379			3,322,377
Assumed reinsurance premium		27,034			—			—			27,034
Refund of premium		(44,314	)		(67,736	)		(2,366	)		(114,416	)
Refund of assumed reinsurance premium		(577	)		—			—			(577	)

		717,997			1,311,408			1,205,013			3,234,418

Dividend expenses		—			—			4,434			4,434
Refunds of surrender value		—			—			2,287,057			2,287,057

		717,997			1,311,408			3,496,504			5,525,909


	2014
(In millions of won)	General insurance			Automobile insurance			Long-term and Individual insurance			Total
Insurance claims paid
Direct premium written by the Group		681,109			1,306,502			1,068,166			3,055,777
Assumed reinsurance premium		38,004			—			—			38,004
Refund of premium		(10,590	)		(63,465	)		(3,119	)		(77,174	)
Refund of assumed reinsurance premium		(631	)		—			—			(631	)

		707,892			1,243,037			1,065,047			3,015,976
Dividend expenses		—			—			3,809			3,809
Refunds of surrender value		—			—			2,148,939			2,148,939

		707,892			1,243,037			3,217,795			5,168,724

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

36. Reinsurance income and expenses

Income and expenses relating to reinsurance transactions for the years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	General insurance			Automobile insurance			Long-term and individual insurance			Total
Reinsurance Income
Reinsurance claims		497,010			51,474			168,661			717,145
Refund of reinsurance claims		(34,672	)		—			(381	)		(35,053	)

		462,338			51,474			168,280			682,092

Reinsurance expenses
Reinsurance premium		650,566			40,517			196,554			887,637
Reversal of refund of surrender value		(4,105	)		—			—			(4,105	)

		646,461			40,517			196,554			883,532

Reinsurance commissions ¹		98,386			(1,292	)		1,178			98,272
Reinsurance profit commissions ¹		(724	)		—			4,118			3,394
Assumed reinsurance commissions ²		5,162			—			—			5,162
Assumed reinsurance profit commissions ²		(85	)		—			—			(85	)

¹	Included in recovered expenses

²	Included in insurance operating expenses


	2014
(In millions of won)	General insurance			Automobile insurance			Long-term and individual insurance			Total
Reinsurance Income
Reinsurance claims		450,123			91,826			143,658			685,607
Refund of reinsurance claims		(6,253	)		—			(603	)		(6,856	)

		443,870			91,826			143,055			678,751

Reinsurance expenses
Reinsurance premium		683,451			81,763			178,881			944,095
Reversal of refund of surrender value		(2,986	)		—			—			(2,986	)

		680,465			81,763			178,881			941,109

Reinsurance commissions ¹		128,031			(831	)		2,967			130,167
Reinsurance profit commissions ¹		(1,727	)		—			3,431			1,704
Assumed reinsurance commissions ²		4,711			—			—			4,711
Assumed reinsurance profit commissions ²		104			—			—			104

¹	Included in recovered expenses

²	Included in insurance operating expenses

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

37. Interest income and expense

Interest income and expense for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Interest income
Cash and cash equivalents		2,233		3,696
Trading assets		9,631		23,783
Financial assets designated at fair value through profit or loss		15,754		11,493
Available-for-sale financial assets		214,611		176,030
Held-to-maturity financial assets		65,758		57,733
Loans		289,079		291,752
Other receivables		16,683		16,822
Other interest income		1,336		2,620

		615,085		583,929

Interest expense
Debts		342		9,033
Deposits		—		1,130
Other		410		390

		752		10,553

¹	Interest income and expense of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦20,939 million and ￦9,997 million, respectively, are included.

Interest income recognized on impaired financial assets for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Available-for-sale financial assets		226		338
Loans		2,036		3,329

		2,262		3,667

38. Gain and loss on valuation and disposal of securities

Gain on valuation and disposal of securities for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Trading assets
Gain on disposal		42,498		65,822
Gain on valuation		3,910		7,570
Financial assets designated at fair value through profit or loss
Gain on disposal		937		917
Gain on valuation		3,131		13,126
Available-for-sale financial assets
Gain on disposal		82,786		79,637
Reversal on impairment loss		—		4
Held-to-maturity financial assets
Gain on redemption		942		—
Financial liabilities at fair value through profit or loss
Gain on valuation		—		96

		134,204		167,172

¹	Gain on valuation and disposal of securities of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦45,177 is included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Loss on valuation and disposal of securities for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Trading assets
Loss on disposal		37,752		39,678
Loss on valuation		1,959		3,891
Financial assets designated at fair value through profit or loss
Loss on disposal		2,519		3,726
Loss on valuation		11,014		230
Available-for-sale financial assets
Loss on disposal		21,523		36,114
Loss on impairment		18,318		9,908
Financial liabilities at fair value through profit or loss
Loss on valuation		—		831

		93,085		94,378

¹	Loss on valuation and disposal of securities of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦29,318 is included.

39. 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 years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Reversal		164		1,519
Gain on disposal		—		1,964

		164		3,483

Loss on impairment		11,609		6,915
Loss on disposal		24		8

		11,633		6,923

¹	Loss on valuation and disposal of loans and other receivables of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦2,124 is included.

40. Gain and loss on valuation and disposal of derivatives

Gain and loss on valuation and disposal of derivatives for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Gain on disposal		18,212		44,892
Gain on valuation		11,461		6,438

		29,673		51,330

Loss on disposal		67,673		34,246
Loss on valuation		104,649		79,189

		172,322		113,435

¹	Gain and loss on valuation and disposal of derivatives of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦10,692 and ￦12,042 are included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

41. Expenses recovered

Expenses recovered for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Reinsurance commissions		98,272		130,167
Reinsurance profit commissions		3,394		1,704
Assumed reinsurance interest		51		58
Agent commission		1,707		786

		103,424		132,715

42. 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 years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Insurance operating expenses		Administrative expenses for assets		Claim survey expenses paid
Short-term employee benefits		231,307		5,281		109,442
Post-employment benefits		30,643		819		11,815
Other long-term employee benefits		1,114		3		372
Welfare expenses		7,332		112		15,052
General and administrative expenses		363,487		72,113		36,377
Acquisition cost		64,330		—		—
Agent commission		248,822		—		—
Claim survey expenses paid		—		—		73,762
Claim survey expenses recovered		—		—		(26,868	)
Assumed reinsurance commission paid		5,162		—		—
Others		1,416		—		—

		953,613		78,328		219,952


	2014
(In millions of won)	Insurance operating expenses		Administrative expenses for assets		Claim survey expenses paid
Short-term employee benefits		230,304		5,177		105,374
Post-employment benefits		23,554		542		9,678
Other long-term employee benefits		78		3		16
Welfare expenses		5,737		42		12,711
General and administrative expenses		336,233		64,031		42,997
Acquisition cost		53,496		—		—
Agent commission		250,920		—		—
Claim survey expenses paid		—		—		58,255
Claim survey expenses recovered		—		—		(26,409	)
Assumed reinsurance commission paid		4,711		—		—
Other		871		—		—

		905,904		69,795		202,622

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

43. Other income and expenses

Other income for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Reversal of provision		533		523
Commission income		2,606		38,013
Rent income		19,665		20,491
Distribution income		—		292
Separate account revenues		17,737		17,251
Miscellaneous operating income		17,699		4,681

		58,240		81,251

¹	Other income of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦31,304 is included.

Other expenses for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Increase in provision		18,577		5,713
Separate account expenses		369		74
Amortization of intangible assets		9,254		16,970
Provision fees		—		2,479
Other expenses related to the subsidiaries		34,671		83,460
Miscellaneous operating expenses		3,248		4,398

		66,119		113,094

¹	Other income of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦52,117 is included.

Other expenses related to the subsidiaries for the years ended December 31, 2015 and 2014, are as follow:


(In millions of won)	2015			2014
Short-term employee benefits		23,440			46,890
Post-employment benefits		1,911			3,922
Retirement bonus		—			470
Welfare expenses		4,727			7,487
Electronic operating expenses		688			6,582
Rental expenses		(940	)		1,839
Fee and commission		724			3,247
Entertainment expenses		121			1,989
Advertising		31			552
Depreciation		97			1,605
Amortization of intangible assets		125			1,853
Tax and dues		930			2,638
Others		2,817			4,386

		34,671			83,460

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

44. Commission income and expenses

Commission income for the years ended December 31, 2015 and 2014, consists of:


(In millions of won)	2015		2014
Trust commission		—		11,594
Acceptance and arrangement		—		10,513
Collective investment security commission		—		1,331
Asset management commission		—		23
Purchase and acquisition commission		—		7,528
Other commission income		—		94

		—		31,083

Individual loan		1		1
Corporate loan		1,452		1,006
Stocks		14		—
Debt securities		150		164
Others		989		5,759

		2,606		6,930

Commission expenses recognized as other expenses for the years ended December 31, 2015 and 2014, consists of:


	2015		2014
Trading commission		—		1,575
Entrusted investments commission		—		26
Remittance commission		—		15
Other commission expenses		—		863

		—		2,479

45. Non-operating income and expenses

Non-operating income for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Gain on disposal of assets held for sale		—		7,099
Gain on valuation of investments in associates		886		1,030
Gain on disposal of property and equipment		241		559
Gain on disposal of intangible assets		143		—
Miscellaneous non-operating income		3,289		5,540

		4,559		14,228

¹	Non-operating income of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦351 is included.

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Non-operating expenses for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Loss on disposal of assets held for sale		3		231
Loss on valuation of investments in associates		—		15
Donation		1,275		5,146
Impairment of intangible assets		3		5,113
Loss on disposal of property and equipment		249		238
Loss on disposal of intangible assets		—		493
Miscellaneous non-operating expenses		3,281		3,307

		4,811		14,543

¹	Non-operating expenses of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦3,212 is included.

46.

Income tax expense

Income tax expense for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Current tax expense¹		34,709			30,125
Tax effect of changes in cumulative temporary differences²		34,867			45,496
Income tax directly applied to equity		(13,198	)		(48,892	)

Income tax expense		56,378			26,729

Income tax expenses from discontinued operations		2,914			555

Income tax expenses from continuing operations		53,464			26,174

¹	Current tax expenses include ￦2,432 million from prior year’s tax adjustments and a follow-up payment.

²	Changes in deferred income tax from temporary differences in 2015 include the decrease in deferred income tax liability of ￦1,415 million caused by the finalization of prior year’s tax adjustment.

An analysis of the profit before income tax and income tax expense for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Profit before income tax		215,726			135,958

Income tax at statutory tax rates		52,206			32,902
Adjustments :
Tax-exempt income		(196	)		(181	)
Non-deductible expense		1,522			1,011
Adjusted tax on tax filing		(60	)		98
Additional payment (refund) of income tax		(2,372	)		(7,686	)
Tax credits		(18	)		—
Other (Effects of tax rate changes, others )		5,296			585

Income tax expense		56,378			26,729

Effective tax rate		26.13	%		19.66	%

100

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Movement in deferred tax assets (liabilities) for the years ended December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Beginning balance			Recognized in profit or loss			Recognized in other comprehensive income			Classified as disposal group held for sale			Ending Balance
Liability for defined benefit plans		52,437			7,195			—			—			59,632
Retirement insurance premium		(38,752	)		(1,367	)		—			—			(40,119	)
Effective interest amortization		2,804			(967	)		—			—			1,837
Emergency risk reserve		(141,609	)		(8,355	)		—			—			(149,964	)
Loss on impairment of investment securities		14,913			6,562			—			—			21,475
Loss on impairment of intangible assets		2,632			192			—			—			2,824
Provisions		6,949			726			—			—			7,675
Depreciation		5,527			(2,939	)		—			—			2,588
Advanced depreciation provision		(1,506	)		8			—			—			(1,498	)
Deferred loan origination fees and cost		(3,900	)		(603	)		—			—			(4,503	)
Accrued income		(16,033	)		(1,442	)		—			—			(17,475	)
Compensation receivables		(7,899	)		190			—			—			(7,709	)
Other		15,236			(22,427	)		—			—			(7,191	)
Gain (loss) on revaluation of land		(24,217	)		—			1			—			(24,216	)
Gain (loss) on valuation of available-for-sale securities		(71,460	)		—			(13,425	)		—			(84,885	)
Gain (loss) on valuation of cash flow hedge		(423	)		—			211			—			(212	)
Change in shares of investment in associate and subsidiaries		(7	)		—			7			—			—
Other comprehensive income arising from separate account		(4,634	)		—			1,099			—			(3,535	)
Deferred tax assets of subsidiaries		1,514			1,280			—			(367	)		2,427
Deferred tax liabilities of subsidiaries		158			(446	)		—			—			(288	)

		(208,270	)		(22,393	)		(12,107	)		(367	)		(243,137	)


	2014
(In millions of won)	Beginning balance			Recognized in profit or loss			Recognized in other comprehensive income			Ending Balance
Liability for defined benefit plans		43,158			9,279			—			52,437
Retirement insurance premium		(32,008	)		(6,744	)		—			(38,752	)
Effective interest amortization		1,961			843			—			2,804
Emergency risk reserve		(139,141	)		(2,468	)		—			(141,609	)
Loss on impairment of investment securities		14,720			193			—			14,913
Loss on impairment of intangible assets		2,143			489			—			2,632
Provisions		5,580			1,369			—			6,949
Depreciation		5,809			(282	)		—			5,527
Advanced depreciation provision		(1,506	)		—			—			(1,506	)
Deferred loan origination fees and cost		(3,910	)		10			—			(3,900	)
Accrued income		(13,876	)		(2,157	)		—			(16,033	)
Compensation receivables		(8,212	)		313			—			(7,899	)
Other		10,262			4,974			—			15,236
Gain (loss) on revaluation of land		(29,455	)		479			4,759			(24,217	)
Gain (loss) on valuation of available-for-sale securities		(19,728	)		—			(51,732	)		(71,460	)
Gain (loss) on valuation of cash flow hedge		(103	)		—			(320	)		(423	)
Gain (loss) on valuation of investments in associates		—			—			(7	)		(7	)
Other comprehensive income arising from separate account		(62	)		—			(4,572	)		(4,634	)
Deferred tax assets of subsidiaries		2,027			(513	)		—			1,514
Deferred tax liabilities of subsidiaries		(432	)		590			—			158

		(162,773	)		6,375			(51,872	)		(208,270	)

101

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

The deferred income tax and the deferred income tax liabilities of the Group are levied by the same taxable entity; and the Group offsets the deferred liabilities if, and only if the Group has a legally enforceable right and intends to offset current income tax assets and current income tax liabilities.

Deductible temporary difference which is not recognized as deferred tax assets as of December 31, 2015 and 2014, are as follows:

2015

2014

(In millions of won)

Temporary
difference

Deferred tax
assets

Temporary
difference

Deferred tax
assets

Investment in subsidiaries¹

4,374

1,059

4,374

1,059

¹	The Group did not recognize deferred tax assets of investment in subsidiaries (excluding consolidated beneficiary certificates) as the related temporary differences are not likely to be utilized in the foreseeable future.

Amounts that were directly charged or credited to equity (or accumulated other comprehensive income) for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015			2014
Gain (loss) on valuation of available-for-sale financial assets		(84,885	)		(71,460	)
Gain (loss) on cash flow hedge		(212	)		(423	)
Gain (loss) on valuation of investments in associates and subsidiaries		—			(7	)
Revaluation of property and equipment		(22,015	)		(22,014	)
Remeasurements of defined benefit plans		18,619			19,276
The accumulated other comprehensive income in separate account		(3,535	)		(4,635	)
Accumulated other comprehensive income related to disposal group		(433	)		—

		(92,461	)		(79,263	)

47. Earnings per Share

Basic earnings per share for the years ended December 31, 2015 and 2014, is as follows:


	2015		2014
Profit for the period (in won) attributable to ordinary equity holders of the Parent Company		164,198,627,698		109,341,984,412
Weighted average number of common shares outstanding		52,686,472		51,709,821
Earnings per share (in won)		3,117		2,115

¹	Weighted-average number of common shares outstanding for the years ended December 31, 2015 and 2014, is as follows:


	2015		2014
Weighted average number of issued common shares		60,000,000		60,000,000
Weighted average number of treasury stocks held		7,313,528		8,290,179
Weighted average number of common shares outstanding		52,686,472		51,709,821

Diluted earnings per share for the years ended December 31, 2015 and 2014, are the same as basic earnings per share as the Group does not have any diluted securities.

48. Commitments and contingencies

(1) The contract amounts of insurance policies in effect as of December 31, 2015, amount to ￦2,514,925,922 million (2014: ￦1,887,453,798 million).

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KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(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 December 31, 2015 and 2014, are as follows:


(In millions of won)		Limit
Commitments	Financial institutions	2015		2014
Bills discounts	The Korea Securities Finance Corporation		50,000		50,000
Half-day call			150,000		100,000
Loans on operating fund			50,000		50,000
Securities underwriting financing			100,000		100,000
Bond dealer’s loan (general)			280,000		280,000
Commitments on bank overdrafts	Shinhan Bank and others		5,000		5,000
Overdraft intra-day			120,000		120,000

			755,000		705,000

(4) Payment guarantees offered by financial institutions as of December 31, 2015, are as follows:


(In US dollars)	Limit		Amount		Guaranteed period
Australia and New Zealand Bank		25,000,000		23,369,038	Dec. 31, 2015 ~Jan. 10, 2017

(5) Pending litigations as a defendant as of December 31, 2015 and 2014, are as follows:


	2015
(In millions of won)	Number of litigations		Amount of damage claim		Descriptions
Automobile insurance		671		45,076	Compensation claim and others
General/long-term insurance and others		406		123,751	Compensation claim and others

		1,077		168,827


	2014
(In millions of won)	Number of litigations		Amount of damage claim		Descriptions
Automobile insurance		342		45,349	Compensation claim & others
General/long-term insurance and others		304		70,428	Compensation claim & others

		646		115,777

For the above pending litigations as a defendant, the Group has reserved estimated losses as a reserve for outstanding claims. As of December 31, 2015, such litigations are in process and the ultimate outcome of such litigations cannot be predicted.

(6) The details of contingent liabilities related to the Group’s debt guarantee as of December 31, 2015, are as follows:


(In millions of won)		Provided	Amount
Real estate PF	Purchase guaranteed agreement	Kwonsun Be To Third Co.,Ltd.		30,000
		HtheHILL Co.,Ltd.		30,000
		New Werye Prugio 4th Co., Ltd		9,600
		IK 2^ND		15,000
		The Van Segok 1st Co.,Ltd.		10,000
		Solution Yeongjong first Co., Ltd		20,000

				114,600

103

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

49.

Related Party Transactions

(1) The related parties as of December 31, 2015 and 2014, are as follows:


2015	2014	Relationship
Kocref Cr-reit VIII	Kocref Cr-reit VIII	Associates
Kocref Cr-reit XI	Kocref Cr-reit XI	Associates
KT-LIG ACE Private Equity Fund Co., Ltd	KT-LIG ACE Private Equity Fund Co., Ltd	Associates
LIG Special Purpose Acquisition 2^nd Co., Ltd	LIG Special Purpose Acquisition 2^nd Co., Ltd	Associates
KB Financial Group Inc.	—	Others¹
Kookmin Bank	—	Others²
KB Kookmin Card Co., Ltd	—	Others²
KB Investment & Securities Co., Ltd	—	Others²
KB Life Insurance Co., Ltd	—	Others²
KB Asset Management Co., Ltd	—	Others²
KB Capital Co., Ltd	—	Others²
KB Real Estate Trust Co., Ltd	—	Others²
KB Investment Co., Ltd	—	Others²
KB Credit Information Co., Ltd	—	Others²
KB Data Systems	—	Others²
KB Savings Bank Co., Ltd	—	Others²
Kookmin Bank (China) Ltd.	—	Others²
—	LIG System Co., Ltd	Others³
—	Huseco Co., Ltd	Others³
—	Lshop Co., Ltd	Others³
—	LIG Ensulting Co., Ltd	Others³
—	LIG NEX 1 Co., Ltd	Others³
—	LIG Corp.	Others⁴

¹	Entities over which the Group has significant influence.

²	Subsidiary of KB Financial Group Inc.

³	Subsidiary of LIG Corp.

²	Entity owned by the Group’s major shareholder

104

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(2) Significant transactions which occurred in the normal course of business with related parties for the years ended December 31, 2015 and 2014, are as follows:


		2015
(In millions of won)	Related parties	Revenues		Expenses
Associates	Kocref Cr-reit VIII		6		11
	Kocref Cr-reit XI		1,784		—
	KT-LIG ACE Private Equity Fund Co., Ltd		149		—
	LIG Special Purpose Acquisition 2nd Co., Ltd		17		—
	LIG-ES Special Purpose Acquisition Co., Ltd		10		—
Others	KB Financial Group Inc.		343		1
	Kookmin Bank		3,064		5,352
	KB Kookmin Card Co., Ltd		1,649		4,139
	KB Investment & Securities Co., Ltd		233		17
	KB Life Insurance Co., Ltd		118		4
	KB Asset Management Co., Ltd		65		—
	KB Capital Co., Ltd		1,269		368
	KB Real Estate Trust Co., Ltd		32		—
	KB Investment Co., Ltd		16		—
	KB Credit Information Co., Ltd		4		194
	KB Data Systems		34		—
	KB Savings Bank Co., Ltd		38		8
	LIG System Co., Ltd		600		14,727
	Huseco Co., Ltd		223		17,899
	Lshop Co., Ltd		1		4,931
	LIG NEX 1 Co., Ltd		278		1
	LIG Corp and others		442		780

			10,375		48,432


		2014
(In millions of won)	Related parties	Revenues		Expenses
Associates	Kocref Cr-reit VIII		745		—
	Kocref Cr-reit XI		2,338		—
	KT-LIG ACE Private Equity Fund Co., Ltd		88		—
Others	LIG System Co., Ltd		901		25,440
	Huseco Co., Ltd		932		38,411
	Lshop Co., Ltd		2		14,462
	LIG Ensulting Co., Ltd		528		4,764
	LIG NEX 1 Co., Ltd and others		1,557		2,590

			7,091		85,667

According to Korean IFRS 1024, the Group includes parent, subsidiaries, parent’s subsidiaries, associates, associates of parent’s subsidiaries, key management (including family members), and post-employment benefit plans of the Group and its related party companies in the scope of related parties. Additionally, the Group discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the consolidated financial statements.

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KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

(3) Repurchase transactions with related parties for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015
	Transaction		Beginning balance		Increase (decrease)			Ending balance
Others
Service Co., Ltd		RP Sold		40		(40	)		—
Related individuals and others		RP Sold		6,110		(5,633	)		477

				6,150		(5,673	)		477


(In millions of won)	2014
	Transaction		Beginning balance		Increase (decrease)			Ending balance
LIG Learning Center Co., Ltd		RP Sold		311		(311	)		—
Service Co., Ltd		RP Sold		—		40			40
Related individuals and others		RP Sold		16,252		(10,141	)		6,111

				16,563		(10,412	)		6,151

(4) The financing transactions with the related parties for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won) Relationship		2015
(In millions of won) Relationship	Related parties	Investment		Collection
Associate	LIG Special Purpose Acquisition 2nd Co., Ltd		20		—

(In millions of won)		2014
Relationship	Related parties	Investment		Collection
	Kocref Cr-reit VIII		—		12,207
Associate	LIG Special Purpose Acquisition 2nd Co., Ltd		10		—

			10		12,207

(5) Account balances with related parties as of December 31, 2015 and 2014, are as follows:


		2015
(In millions of won)	Related parties	Receivables		Payables
Investments in associates	Kocref Cr-reit XI		18,188		—
	LIG Special Purpose Acquisition 2nd Co., Ltd		421		—
	LIG-ES Special Purpose Acquisition Co., Ltd		407		—
Others	Kookmin Bank		1,336		5,240
	KB Kookmin Card Co., Ltd		6,446		6,665
	KB Investment & Securities Co., Ltd		8		65
	KB Life Insurance Co., Ltd		20		64
	KB Capital Co., Ltd		4		2,372
	KB Credit Information Co., Ltd		—		14
	Kookmin Bank (China) Ltd and others		7,183		—
	Retirement Pension		—		19,374

			34,013		33,794

106

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


		2014
(In millions of won)	Related parties	Receivables		Payables
Investments in associates	Kocref Cr-reit XI		17,983		—
	KT-LIG ACE Private Equity Fund Co., Ltd		22		—
Others	LIG System Co., Ltd		52		1,275
	Huseco Co., Ltd		—		2,711
	Lshop Co., Ltd		116		545
	LIG NEX 1 Co., Ltd		229		287

			18,402		4,818

(6) There is no collateral the Group provide to the related parties as of December 31, 2015.

(7) The details of assets pledged as collaterals from related parties as of December 31, 2015 are as follows:


(In millions of won)	Assets pledged as collateral	2015
KB Wise Star private Real Estate Investment Trust No. 2	Building/Land		26,000

(8) Commitments provided by related parties as of December 31, 2015 are as follows:


(In millions of won)	Related party	2015
Loan commitments	Kookmin Bank		20,000

(9) Key management personnel, including registered directors and non-registered outside directors compensation for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Short-term employee benefits	￦	7,917		11,769
Retirement benefits		1,244		3,279

	￦	9,161		15,048

(10) Loans for management personnel and employees as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Loans secured by real estate	￦	300		391
Loans secured by credits		3,501		3,562
Loans secured by third party guarantees		19,015		22,379

	￦	22,816		26,332

107

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

50. Interests of unconsolidated structured entity

(1) Nature and range of interests of unconsolidated structured entity

1) The Group is involved in the structured entities through asset-backed securitization, structured financing and investment funds. Details of the unconsolidated structured entities are as follows:


Nature	Purpose	Activity	Method of Financing
Asset-backed securitization	Facilitation of raising funds through transfer of securitization assets	(1) Purchase and transfer of securitization assets (2) Issuance and repayment of ABS	Issuance of ABS based on securitization assets
Structured financing	(1) Granting PF loans to SOC and real estate (2) Granting loans to ships SPC (3) Loans for M&A	(1) Construction of SOC and real estate (2) Building ships or construction (3) M&A	Loan commitments through providing lines of credit and investment agreements
Investment funds	Investment in beneficiary certificates, PEF and partnerships	Management of fund assets and allocation of fund profits	Issuance of beneficiary certificates, investments and borrowing

2) Total size of the unconsolidated structured entities as of December 31, 2015 and 2014, are as follow:


	2015								2014
	Asset-backed securitization		Structured deposits		Investment funds		Total		Asset-backed securitization		Structured deposits		Investment funds		Total
Total assets		10,882,012		12,441,536		14,467,342		37,790,890		18,036,459		12,146,014		30,325,114		60,507,587

(2) Nature of associated risks

As of December 31, 2015 and 2014, the risks associated with the Group’s interests in unconsolidated structured entities, are as follows:


	2015
(In millions of won)	Asset-backed securitization		Structured deposits		Investment funds		Total
Assets on financial statements
Financial assets at fair value through profit or loss		—		—		37		37
Available-for-sale financial assets		482,248		512		1,479,995		1,962,755
Loans		210,727		798,971		254,532		1,264,230
Investment in associates		—		—		9,132		9,132
Other assets		3,744		2,357		1,685		7,786

		696,719		801,840		1,745,381		3,243,940

Maximum exposure to loss¹		696,719		929,941		2,179,466		3,806,126
Methods of determining the maximum exposure to loss		—		Loan commitments, investment agreements, purchase commitments and acceptances and guarantees		Investment agreements

¹	Maximum exposure to loss includes the recognized assets in the consolidated statements of financial position of the Group.

108

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014


	2014
(In millions of won)	Asset-backed securitization		Structured deposits		Investment funds		Total
Assets on financial statements
Financial assets at fair value through profit or loss		884		—		132,298		133,182
Available-for-sale financial assets		470,971		1,682		1,465,667		1,938,320
Derivatives		—		—		89		89
Loans		302,109		914,911		263,442		1,480,462
Investment in associates		—		—		11,553		11,553
Other assets		4,852		3,210		2,237		10,299

		778,816		919,803		1,875,286		3,573,905

Maximum exposure to loss¹		778,816		1,101,086		2,040,836		3,920,738
Methods of determining the maximum exposure to loss		—		Loan commitments, investment agreements, purchase commitments and acceptances and guarantees		Investment agreements

¹	Maximum exposure to loss includes the recognized assets in the consolidated statements of financial position of the Group.

51. Separate account

Separate account statements of financial position as of December 31, 2015 and 2014, are as follows:


(In millions of won)	2015				2014
	Retirement insurance		Retirement pension		Retirement insurance		Retirement pension
Assets¹
Cash and cash equivalents		11,273		218,287		11,761		67,352
Financial assets at fair value through profit or loss		—		223,051		—		235,638
Available-for-sale financial assets		—		1,820,689		—		1,137,192
Held-to-maturity financial assets		—		10,000		—		10,000
Derivative assets to hedge		—		637		—		—
Loans and other receivables		—		438,097		—		282,224
Non-financial assets		—		3		—		2
General accounts receivable		1,487		292,536		59		449,907

		12,760		3,003,300		11,820		2,182,315

Liabilities²
Other financial liabilities		6		14,992		1		8,771
General accounts receivable		54		9,597		60		27,539
Policyholders reserve (insurance)		12,700		—		11,759		—
Policyholders reserve (investment)		—		2,964,105		—		2,126,854

		12,760		2,988,694		11,820		2,163,164

Equity
Accumulated other comprehensive income		—		14,606		—		19,151

		12,760		3,003,300		11,820		2,182,315

¹	Separate account asset in the consolidated 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 consolidated financial statement is the total amount of retirement insurance liability and retirement pension liability less the general account payable.

109

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

Separate account statements of comprehensive Income for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015				2014
	Retirement insurance		Retirement pension		Retirement insurance			Retirement pension
Income
Premium income		1,360		—		5			—
Investment income		197		95,364		330			72,593
Other operating income		113		1,445		40			246

		1,670		96,809		375			72,839

Expenses
Policyholders reserve (insurance)		939		—		(788	)		—
Policyholders reserve (investment)		—		55,022		—			43,742
Insurance claims paid		642		—		1,071			—
Investment expenses		16		24,053		18			12,828
Other operating expenses		73		17,734		74			16,269

		1,670		96,809		375			72,839

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 years ended December 31, 2015 and 2014 were ￦3,529million and ￦3,300 million, respectively.

52. Supplemental cash flows information

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.

Significant non-cash activities for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014
Transfer from investment property to owner-occupied property and equipment		24,901		(37,276	)
Transfer from property and equipment to assets held for sale		—		1,541
Transfer from assets related to the subsidiaries to assets held-for-sale		1,039,888		—
Transfer from assets related to the subsidiaries to liabilities held-for-sale		884,470		—
Transfer from account payables to available-for-sale financial assets		513		—

110

KB Insurance Co., Ltd (Formerly LIG Insurance Co., Ltd) and Subsidiaries

Notes to The Consolidated Financial Statements

December 31, 2015 and 2014

53. Operating income

Operating income for the years ended December 31, 2015 and 2014, are as follows:


(In millions of won)	2015		2014¹
Operating revenue
Insurance operating revenue		9,909,858		9,751,262
Investment revenue		845,453		866,254
Other operating revenue		354,971		269,273

		11,110,282		10,886,789

Operating expenses
Insurance operating expenses		10,310,367		10,233,199
Investment expenses		373,416		311,319
Other operating expenses		184,109		205,998

		10,867,892		10,750,516

Operating income		242,390		136,273

¹	Operating revenue, operating expenses and operating income of LIG Investment & Securities Co., Ltd, which is classified as disposal group held for sale, amounting to ￦108,292, ￦105,598 and ￦2,694, respectively, are included.

111