2023 Annual Report

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The past 12 months were an extremely busy time for all of us, as we recovered from the pandemic and resumed our usual activities, the provincial economy began to thrive, and Alberta’s population grew by about 200,000 people.

Alberta Municipalities advocated relentlessly on a wide range of issues that matter to our members, including the provincial government’s intentions to create an Alberta Provincial Police Service (APPS), potentially introduce political parties at the local level, and address Alberta’s dire health care situation.

For eight months, we repeatedly made the case that all municipalities across Alberta need more provincial funding to build and maintain their local infrastructure. We sounded the alarm about Alberta’s $30-billion (and growing) infrastructure deficit and called on the provincial government to increase Local Government Fiscal Framework (LGFF) funding in its 2024 Budget from $722 million to $1.75 billion. Our efforts to get politicians, commentators and regular Albertans talking about infrastructure worked, but we realize it will take additional work on ABmunis’ part to translate words into actions and more provincial funding.

While the provincial government did not rule out the creation of an APPS altogether, our advocacy efforts helped shift the idea to the ‘back burner’. During the 2023 provincial election, ABmunis drew attention to the issue of public safety through our ‘Think Alberta, Vote Local’ public information campaign. We emphasized that only seven per cent of respondents to our February 2023 survey said ‘a lack of policing resources’ was a major cause of crime. Instead, respondents pointed to the economy and unemployment, drug and alcohol abuse, homelessness and poverty as major causes of crime.

I’m proud of what we achieved through our long-term Future of Municipal Government (FOMG) initiative in 2023. Another four discussion papers were published in 2023, bringing the number of FOMG discussion papers published to seven. The main finding of FOMG thus far – that intermunicipal collaboration is key to building thriving communities – was discussed at length at our 2023 Summer Municipal Leaders’ Caucus sessions.

Our annual 2023 Convention & Trade Show was a tremendous success. More than 1,200 members and 125 exhibitors took part in this year’s event, making it Alberta’s largest gathering of municipal leaders. This year’s Resolutions session saw members debate and vote on no less than 26 resolutions. A staggering 98 per cent of members voted in favour of asking the provincial government to add $1 billion a year to the LGFF’s base funding amount when it comes into effect in 2024. Ninety-five per cent of members voted in favour of asking the provincial government to keep political parties out of municipal elections.

I look forward to the year ahead and whatever 2024 holds in store for us. Together, we will successfully navigate Alberta’s increasingly complex political environment and work to ensure Albertans receive the infrastructure, services, and programs they need in their communities, now and for generations to come.

–Tyler Gandam PRESIDENT

Alberta Municipalities recognizes how difficult it is for municipalities to advocate for the needs of the Albertans they represent on their own and even in regional groups or clusters of municipalities of similar size. When ABmunis speaks to the provincial and federal governments, it does so with the combined power and volume generated by 265 member communities – communities of various sizes located throughout Alberta. Our collective voice repeatedly cut through the political noise and clatter in 2023.

Throughout 2023, we worked hard to provide products and services that helped address the needs of your communities and delivered tremendous value. Power+, our newest offering, is an innovative and long-term electricity solution to meet your needs for budget certainty at a low total cost. Launched in 2022, Power+ combined the purchasing power of more than 120 municipalities and not-for-profit organizations under a single public procurement process to achieve results that no single member could accomplish alone. This year, we finalized significant cost savings for our members, particularly during a period of immense volatility and escalated electricity prices. Given the strong success and significant member value generated from our initial offering, we are eagerly anticipating the opportunity to use a similar approach in providing electricity and natural gas in 2024-25.

Our Insurance & Risk Services offset premiums by providing a rebate from its Insurance Reciprocal (MUNIX) of $3 million in 2023 to shield members from market shocks and dramatic premium increases and deliver budget stability. Over the last three years, $10.5 million has been rebated in the form of premium reductions to MUNIX pool subscribers. Our Employee Benefits team and Regional Representatives worked hard this fall to deliver in-depth reviews to participating members during our annual renewal period. As employees are increasingly finding value in their employee benefits coverages and usage continues to rise, you can trust that our commitment to sustainable plans allows members to avoid the significant premium fluctuations witnessed in the marketplace from one year to the next.

Our Clean Energy Improvement Program (CEIP) gained more momentum in 2023. This program is an innovative financing tool that enables residential and commercial property owners to access flexible, longterm financing through their municipality, improving their ability to pay for energy efficiency and renewable energy upgrades. Another seven Alberta communities introduced CEIP in 2023, doubling the number of participating municipalities.

I am proud of everything ABmunis achieved in 2023. While I recognize the work of municipalities and associations like ours is never done, I am excited at the prospect of what we can accomplish in 2024 by working together to tackle and overcome our shared challenges. Alberta Municipalities – Strength in Members!

– Dan Rude CEO

Our Board

We are a change agent that enables municipalities to be a fully engaged order of government with the capacity to build thriving communities.

We are the voice of Alberta’s urban municipalities and we provide visionary leadership, solutions-based advocacy, and service excellence.

CORE VALUES

EXCELLENCE

Provide municipal expertise through timely, consistent and accurate services, continuous improvement and innovation.

MEMBER FOCUS

Offer resources and solutions tailored to meet the needs of our members.

ACCOUNTABILITY

Act with integrity and transparency.

COLLABORATION

Establish networks and partnerships through which we engage and respond.

COMMUNICATION

Inform, educate and listen to members and other stakeholders.

Ren Giesbrecht – Summer Village of West Cove, Deputy Mayor Deborah Reid-Mickler

Front row: Mayor Tara Elwood – Village of Alberta Beach, Councillor Tina Petrow – City of Airdrie, Mayor Trina Jones –Town of Legal, Mayor Tanya Thorn – Town of Okotoks, Councillor Andrew Knack – City of Edmonton

Not pictured: Councillor Peter Demong – City of Calgary, Councillor Erin Stevenson – City of Spruce Grove, Councillor Keren Tang – City of Edmonton, Councillor Jennifer Wyness – City of Calgary

Back row: Mayor Bill Rock – Village of Amisk, Councillor Krista Gardner – Town of Calmar, Mayor Tyler Gandam – City of Wetaskiwin, Councillor Dylan Bressey – City of Grande Prairie, Mayor

Member Engagement

We are thankful for the many opportunities we had in 2023 to build connections between members and engage in meaningful conversations with municipal leaders.

More than

1200 delegates attended our annual Convention & Trade Show – Alberta’s largest municipal gathering.

125 exhibitors took part in our 2023 Convention & Trade Show.

370 members attended our President’s Summit & Spring Municipal Leaders’ Caucus in the last week of March.

One of our key priorities is bringing members together to foster meaningful connections. We believe that together, we can gain real ground.

AMPLIFYING THE VOICE OF OUR MEMBERS

ABmunis’ non-partisan Think Alberta, Vote Local election campaign succeeded in delivering attention to our members’ three priority issues:

■ Community Safety

■ Community Building, and

■ Community Healthcare.

Our online campaign achieved 8.7 million impressions.

Our business development team held over

330 member visits this year, ensuring we heard the voice of our members.

Responsible for communities within specific regions of the province, our Regional Managers are your trusted source of information and are able to provide the most appropriate services, recommendations, and insights at the right time for the best possible success. Connect with your regional representative.

Infrastructure Funding

While infrastructure funding has been a long-standing priority of ours, we succeeded in drawing greater public attention to the issue starting at our Spring 2023 Municipal Leaders’ Caucus. That’s when we said that Alberta faces a multibillion-dollar infrastructure deficit, and we called on the provincial government to increase the starting amount of the Local Government Fiscal Framework (LGFF) Capital funding by $1 billion.

We continued talking about this serious funding gap during the spring 2023 provincial election and through our post-election ‘Let’s Talk About Infrastructure’ public information campaigns.

Following that campaign, an ABmunis sponsored resolution was brought forward at our 2023 Convention where 98 per cent of our members approved the call for LGFF Capital to start at $1.75 billion instead of the planned $722 million. We then engaged in an extensive media campaign throughout fall 2023 to increase public pressure for the province to increase LGFF Capital funding in the 2024 budget.

As things stand now, LGFF simply won’t provide municipalities with enough funding to deliver on the provincial government’s ambitious claim – that Alberta is the best province in Canada in which to live, work, and raise a family. We want Alberta to succeed as the province’s population grows, but it will take more funding for local infrastructure to do it.

Despite the current challenge in securing an increase in infrastructure funding, ABmunis had two notable advocacy outcomes in the year:

■ The province amended the Local Government Fiscal Framework Act to remove the 50 per cent cap on the revenue index factor calculation so that the funding pot will grow at the same rate as provincial revenue. This increases the likelihood that the funding pot will grow with Alberta’s economy and inflation over the long term.

■ In December 2023, the province released the LGFF Capital allocation formula for the non-charter municipalities. Many of the principles and allocation factors that ABmunis advocated for are reflected in that formula.

Our association continued its advocacy efforts on policing and public safety throughout 2023. A survey on policing and public safety in Alberta was conducted for ABmunis by pollster Janet Brown in January 2023. The results confirmed what our association had already been saying for nearly a year – most Albertans see no reason to replace the RCMP with a new provincial police service.

A resounding 85 per cent of respondents said that if the Government of Alberta insisted on going ahead with the creation of a provincial police service, the matter needed to be put to a referendum.

When we learned that the federal government was passing on the costs of the RCMP’s retroactive pay increase to municipalities that rely on contracted policing in late March, we expressed our members’ objections. We added our voice to a nationwide call for the Government of Canada to reconsider its approach and absorb the one-time costs, which amounted to $60 million in Alberta.

During the 2023 provincial election, ABmunis drew attention to the issue of public safety through our ‘Think Alberta, Vote Local’ public information campaign. We emphasized that only seven per cent of respondents to our February 2023 survey said ‘a lack of policing resources’ was a major cause of crime. Instead, respondents pointed to the economy and unemployment, drug and alcohol abuse, homelessness and poverty as major causes of crime.

While the provincial government hasn’t ruled out the creation of an Alberta Provincial Police Service (APPS), it appears to have placed the idea on the ‘back burner’ for now, as neither of the 2023 mandate letters for the Minister of Justice and the Minister of Public Safety and Emergency Services direct the Minister to create an Alberta Provincial Police Service. Instead, the province has chosen to boost the number of sheriffs and task them with assisting municipal police services as needed. Alberta Municipalities’ Board of Directors believes our advocacy efforts on this issue over the past few years have paid off, but we will continue to closely watch the situation in 2024.

Community Healthcare

Community healthcare continued to be a ‘top of mind’ issue for us in 2023. Municipalities of all sizes and locations experienced numerous challenges, including doctor shortages, reduced hours of operation at hospitals and medical clinics, emergency room closures, and ambulance response times.

Unsurprisingly, community healthcare was one ABmunis’ top three issues during the 2023 provincial election. Our ‘Think Alberta, Vote Local’ campaign encouraged Albertans to ask candidates which party had the best plan to attract and keep the medical professionals their community needs to ensure the health and well-being of their family, friends, and neighbours.

In late November, we welcomed the news that nurse practitioners will be expanding their role in Alberta’s healthcare system in early 2024. The news, which may increase Albertans’ access to primary healthcare services, especially for residents in smaller rural communities, aligns with our 2023 resolution on the Integration of Nurse Practitioners into the Alberta Healthcare System. Our association has advocated for an expanded role for nurse practitioners since 2015.

In early 2023, ABmunis and RMA collaborated to develop principles for an Alberta Emergency Medical Services (EMS) system, which were shared with the province through our participation on the Alberta EMS Provincial Advisory Committee. ABmunis was pleased to see that that the province’s 2023-24 EMS Operating Plan incorporated all of the committee’s recommendations, and that the identified actions in the operating plan largely align with RMA and ABmunis’ joint principles.

Extended Producer Responsibility

A significant step of the Extended Producer Responsibility (EPR) transition occurred with registration opening for communities in the fall of 2023.

We are now working towards supporting municipalities as they work with producers to build the framework to take over responsibility for designated recycling materials. Municipalities who wish to provide recycling services to producers need to enter into contracts with producers. ABmunis will assist by reviewing standard contract documents such as Master Services Agreements and Statements of Work to help municipalities understand their new roles under EPR. Municipalities will retain their role for collecting and managing recycling for non-residential sources.

As of March 1, 2024, 254 municipalities have registered with the Alberta Recycling Management Authority (ARMA), representing 94% of Albertans.

Registration remains open for communities wishing to participate in EPR.

Family & Community Social Services (FCSS)

Our advocacy efforts secured more FCSS funding from the provincial government, resulting in a 5% increase to the annual budget in 2023.

While we appreciate the provincial government increasing FCSS funding from $100 million to $105 million, many of our members are contributing more than the 20 per cent called for by the provincial government’s program. We support the FCSS Association of Alberta in its call for an additional $25 million in annual funding for these social services and supports. More needs to be done to address the root causes of social disorder in communities throughout Alberta.

‘Future of Municipal Government’ Initiative

The Future of Municipal Government (FOMG) project is a partnership between ABmunis and the University of Calgary’s School of Public Policy.

The purpose of the project is to explore and assess options for government structures that will enable municipalities to build thriving communities into the future. The project used research as the foundation for dialogue among municipalities on common challenges and opportunities. To date, the main finding of FOMG is that intermunicipal collaboration is key to building thriving communities. Intermunicipal collaboration was discussed at length at our President’s Summit in March 2023, and these discussions informed ABmunis’ Recommendations on the Future of Intermunicipal Collaboration. These recommendations will guide our ongoing work with the Government of Alberta and other municipal associations to support greater collaboration.

Elected Officials Education Program (EOEP)

Over 500 mayors, councillors, and CAOs participated in EOEP courses in 2023 where they expanded their knowledge on issues such as municipal planning, finances, public engagement, regional collaboration, and other key topics.

2023 also marked EOEP’s launch of a new Effective Meetings course, which sold out and received top marks from participants. Based on this feedback, EOEP plans to continue offering this course in 2024 and beyond.

Since launching the Municipal Elected Leaders Certificate program last year, 25 more elected leaders graduated to receive the certificate in 2023. This honour is bestowed when elected officials complete the seven required courses.

EOEP is a joint initiative of ABmunis and the Rural Municipalities of Alberta.

Creating Value For Our Members

At Alberta Municipalities, we’re proud to serve communities. And one of the ways we serve you is by providing essential services that are tailored to meet the needs of Alberta’s communities.

Our Employee Benefits program serves more than

12,500 municipal & not-for-profit employees. Over 120 members participated in Power+

More than 800 municipalities & not-for-profit organizations participate in our Insurance & Risk Services. Our products & services have an overall satisfaction rating of 97% or higher.

As of December 31, 2023, our High Interest Savings Account (HISA) provided 5.55% an interest rate of

In 2023, participants of our HISA collectively earned over $13Min interest.

Retirement Services

We offer five different retirement and savings plan options to provide members with the retirement solutions needed to attract and retain valued employees.

Over 3200 employees covered Over 160 employers Over $155M in assets under management

Power+, our newest offering, is an innovative electricity solution to meet our members’ needs for budget certainty at a low total cost.

Launched in the spring of 2022 and concluded in 2023, the member response to our initial call was tremendous. Over 120 municipalities and not-for-profit organizations combined their purchasing power under a single public procurement process to achieve results that no one member could achieve on their own. By purchasing electricity directly from a generator, these participating members secured significant cost savings of nearly $18 million while also receiving member catered services from our energy experts including:

■ distribution & transmission reviews;

■ budget recommendations; and

■ energy saving recommendations.

Given this success, we are in the process of structuring another Power+ as well as a Natural Gas offering for members that we look forward to releasing in 2024-2025.

Insurance & Risk Services: Power of our Program

Through our Insurance and Risk Services, we provide flexible coverage that evolves to meet your changing needs, all while ensuring continuous protection to you and your communities.

In the last few years, the insurance marketplace has been challenged in a number of ways. Severe weather, supply-chain challenges and increasing auto claims costs associated with catalytic converter thefts and vehicle thefts, are all impacting premiums. While there are signs that some of these pressures are easing and we are observing that the market is stabilizing, the insurance marketplace is still under pressure to raise premiums to offset the losses.

In times like this, premium increases are a reality we must face, but organizations that are part of our program are able to benefit from our MUNIX insurance reciprocal. Participants benefit from surplus equity being returned in the form of premium credits offsetting the increase that is present in the insurance market. For 2024, we have applied a total of $3.3 million credit to reduce premiums. This marks our continued commitment to providing members with stability during volatile times.

RISK MANAGEMENT

Another highly effective method to manage your insurance premiums is your risk management practices. Our members have access to specialized expertise to help manage risk including learning opportunities and loss control assessments.

RISK MANAGEMENT ELEARNING

712 modules were completed by our members

15 complementary eLearning modules

Top 3 eLearning modules:

■ WHIMIS

■ Workplace Violence Prevention for Municipalities

■ Essentials of Municipal Risk Management

2023 PUBLIC RISK CONFERENCE

RISK AWARE WEBINAR SERIES

Launched in 2022, the Risk Aware webinar series equips municipalities with cutting-edge strategies in risk management and addresses emerging challenges to support their resilience. We’re committed to empowering local governments with knowledge, fostering communities that are safer, well-prepared, and future-ready.

Previous topics include:

■ Facility Use Agreements: Why, When, and How?

■ Be Prepared – Creating a Culture of Preparedness in Alberta.

■ Workplace Abuse Policies

■ Cyber Security

This annual event provides members with a 2-day, in-person experience to connect, learn, and discuss specific issues with subject matter experts. The 2023 event brought together attendees representing more than 40 different municipalities and organizations.

DID YOU KNOW?

We provide a number of in-house services to participating members. Whether you’re interested in a self-led learning opportunity or an in-person experience, our goal is to share knowledge that helps you best manage your risk and build stronger and safer communities.

Employee Benefits: Industry Trends/Program Stability

Our Employee Benefits team is proud to serve those who serve communities by providing life, health, accident, and dental insurance.

In Alberta’s public sector, the offering of employee benefits is an integral part of an employee’s total compensation package. Increased use of benefits, particularly within health and dental care, along with claims stemming from mental health issues, and the rising costs of drug and paramedical services, has led to higher costs for benefits plans throughout the marketplace.

With these market trends in mind, we are particularly proud to be committed to managing our plans with our members’ needs as our priority. Our goal is to work with you to achieve long-term, stable pricing by keeping administration costs low. Our commitment is to providing plans that are more predictable and sustainable cost-wise, in order to prevent our members from experiencing dramatic rate increases witnessed in the marketplace from year to year.

APEX Supplementary Pension Plan

Our APEX Supplementary Pension Plan provides a competitive edge, helping organizations attract and retain valued employees.

As APEX is a supplementary pension plan to the Local Authorities Pension Plan LAPP, it must be maintained as the same type of pension plan. In 2023, LAPP announced changes to their plan, meaning minor changes needed to be made to the APEX Supplementary Pension Plan to bring it into alignment with the changes made to LAPP. As such APEX followed suit and we amended our plan in 2023 as well.

LAPP advised plan administrators that the new normal, form of pension for members with a pension partner will be the ‘Joint Lifetime Reduced by 1/3 on the member death only’. These changes will result in members not seeing their pension payment reduced due to their pension partner pre-deceasing them. The changes were set to come into effect on January 1, 2024.

As APEX Plan Members are required to elect the same form of pension for APEX as LAPP, the APEX Supplementary Pension Plan was updated to align with LAPP’s normal form of pension.

We are committed to providing strong plan management of APEX and we will continue to evolve to meet the retirement needs and equity expectations of our stakeholders.

Clean Energy Improvement Program (CEIP)

In 2023, our Clean Energy Improvement Program (CEIP) continued to grow with another 6 municipalities passing Clean Energy Improvement bylaws during the year, bringing the total number of CEIP bylaws to 27 by year-end. Active programs grew from 8 programs in 2022 to 15 in 2023, nearly doubling the number of programs in under one year.

■ In 2023, there was approximately $46.5M in low-cost financing available to residential and commercial property owners (in participating municipalities) to undertake energy efficiency and renewable energy upgrades.

■ In 2023, ABmunis helped support our partner municipalities in securing ~$16M in low-cost financing and over $8M in grant funds from the Federation of Canadian Municipalities to capitalize and operate their local Clean Energy Improvement Programs.

■ CEIP became an award-winning program in 2023 by winning a “Clean50 Top Project Award”, which recognizes a select number of projects across Canada with significant environmental impact.

■ We expect the momentum to continue throughout 2024 with approximately nine new programs expected to launch.

Total project applications submitted in 2023:

324

Total active projects at the end of 2023:

732

New programs launched in 2023 include:

■ City of Grande Prairie

■ City of Lethbridge

■ City of Calgary

■ Sturgeon County

■ Village of Stirling

■ Town of Westlock

■ Strathcona County

Total number of completed projects in 2023: 133

Total number of participating Qualified Contractors at the end of 2023:

333

Municipal Climate Change Action Centre

In 2023, the Municipal Climate Change Action Centre completed over 120 projects and catalyzed $21.3 million in investments. Annually, these projects will reduce emissions by an estimated 4,504 tonnes of CO2 equivalent and save municipalities an estimated $778,411 in combined energy savings costs. This activity created 217 energy efficiency and renewable energy jobs.

12 active energy manager positions serving 21 communities

The Action Centre provided municipalities and community-related organizations up to $750,000 for energy saving upgrades in arenas, aquatic centres and other recreation facilities. Projects supported by the Recreation Energy Conservation Program in 2023 unlocked over $370,000 in annual energy savings by supporting the installation of lighting retrofits, REALice installations, HVAC efficiency improvements, and more.

By the end of 2023, 24 risk assessments and adaptation projects were completed across Alberta. $5.2 million was invested in electric vehicles and charging infrastructure, including things like cars, ice resurfacers, utility cars, and charging stations.

This year the Municipal Climate Change Action Centre administered programs funded by the Government of Alberta and Natural Resources Canada. The Action Centre will launch new programs in the Spring and Summer of 2024.

OUR BOARDS & COMMITTEES

Governing with Excellence

Alberta Municipalities is committed to the highest standards of corporate governance and refers to the Canadian Coalition for Good Governance (CCGG) Building High Performance Boards principles in fulfilling our responsibilities as fiduciaries in meeting our obligations with our members.

To this end, your Association strives to ensure its Boards and Committees adhere to the following CCGG guidelines.

A HIGH-PERFORMANCE BOARD IS ACCOUNTABLE AND INDEPENDENT.

Guideline 1. Ensure the board is accountable, transparent, fair, and responsible.

Guideline 2. Ensure directors are independent of management.

Guideline 3. Separate the roles of Board Chair and Chief Executive Officer.

A HIGH-PERFORMANCE BOARD HAS EXPERIENCED, KNOWLEDGEABLE AND EFFECTIVE DIRECTORS WITH THE HIGHEST LEVEL OF INTEGRITY.

Guideline 4. Ensure that directors are highly competent and bring the required knowledge and experience to the board.

Guideline 5. Ensure that the goal of every director is to make integrity the hallmark of the organization.

Guideline 6. Establish reasonable compensation for directors.

Guideline 7. Evaluate board and committee performance.

A HIGH-PERFORMANCE BOARD HAS CLEAR ROLES AND RESPONSIBILITIES.

Guideline 8. Establish terms of references for board committees and ensure committee independence.

Guideline 9. Adopt well defined board policies and processes that support board independence.

Guideline 10. Oversee Strategy.

Guideline 11. Oversee Risk Management.

Guideline 12. Assess the Chief Executive Officer and plan for succession.

Guideline 13. Develop and oversee executive and employee compensation policies.

A HIGH-PERFORMANCE BOARD ENGAGES WITH MEMBERS AND COMMUNITIES.

Guideline 14. Advocate for the needs of all our members, from the smallest village to the largest city.

Guideline 15. Support communities by identifying and providing services that help them build resilient and thriving communities.

CORPORATE

ABmunis

Association of Alberta Municipalities

AMSC

Alberta Municipal Services Corporation

AMSCIS

AMSC InsuranceServices LTD

BOARD & COMMITTEE STRUCTURE

Sustainability and Environment Committee

Index: Subsidiary

Plan Sponsor

AEOEPC

Alberta Elected Officials Education Program Corporation

MUNIX

Alberta Municipal Insurance Exchange APEX

APEX Supplementary Pension Trust

ABmunis

Association of Alberta Municipalities

Safe and Healthy Communities Committee

Small Communities Committee

Municipal Governance Committee

Investment Advisory Committee

Human Resources Committee

Infrastructure Committee

Executive Committee

Economic Strategy Committee

Audit and Finance Committee

Commitment & Governance Meetings

The following summary provides the annual Board and Standing Committee meetings held per year, and Director compensation and expenses reimbursement.

The remuneration of Directors reflects the nature of service, complexity of tasks and amount of time dedicated to service. Director expenses are paid in accordance with the Government of Alberta rates. Each Director serves on one or more standing committees.

COMMITMENT

Attendance at Board and Standing Committee meetings is vital to the success of the Board and Standing Committees and its actions and is one measure of the commitment and contribution of an individual Director. Directors are expected to attend Board and Standing Committee meetings in which they serve.

Listed below are the number of meetings held in 2023.

THE ROLE OF THE BOARD

The Alberta Municipalities Board is responsible for effectively governing the Association by carrying out the powers, duties and functions expressly given to it under legislation and the Association’s Bylaws and policies.

KEY BOARD MEMBER RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:

■ Attending and preparing for all Board meetings.

■ Participating effectively on one or more Board committees.

■ Developing and evaluating the specific advocacy programs and services of Alberta Municipalities.

■ Monitoring and influencing government legislation, programs and policies which impact the membership.

■ Apprising the membership of significant national and provincial trends and/or issues that affect local governments and taking action to ensure their interests are known to decision makers.

■ Communicating Alberta Municipalities policies and initiatives to elected municipal and other public officials.

■ Encouraging their own council and regional groups to endorse important policy issues.

■ Encouraging neighbouring municipalities to provide input and advice on Alberta Municipalities policies and initiatives.

THE ROLE OF THE PRESIDENT

The President provides overall leadership to enhance the effectiveness of the Board. They are responsible for ensuring the effective functioning of the Board in its role of governing the Association.

KEY RESPONSIBILITIES OF THE PRESIDENT INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:

■ Guides the Board in the fulfillment of its mandate.

■ Ensures the Board has a strategic focus and represents the best interests of the Association.

■ Ensures that the Board plays a full and constructive part in the development and determination of the Association’s strategies and policies.

■ Ensures effective communication among the Board and between the Board and the CEO and serves as the contact point for Board members on all Board issues.

■ Chairs Board and Executive Committee meetings, ensuring meetings are conducted in an efficient, effective, and focused manner.

■ Encourages participation of all Board members, maintaining a cohesive group without losing diversity of opinion and objectivity.

■ Acts as the official spokesperson for Alberta Municipalities.

2023/2024 Alberta Municipalities Board of Directors

TERM LENGTH, BOARD & COMMITTEE PARTICIPATION

MEMBER

Tyler Gandam

(elected Sept 2023)

(served to Sept 2023)

Dylan Bressey

Krista Gardner

Deborah Reid-Mickler

Erin Stevenson

Tina Petrow

Tanya Thorn

Cities up to 500,000

(elected Sept 2023)

(elected Sept 2023)

(served to Oct 2023)

(served to Oct 2023)

(elected Sept 2023)

months (elected Sept 2023)

(appointed Oct 2023)

MEMBER POSITION TERM

Trina Jones Vice-President and Director, Towns Director, Towns East 8 months (served to Sept 2023) 12 months

Bill Rock Director, Villages East 12 months

Tara Elwood Director, Villages West 4 months (elected Sept 2023)

Ren Giesbrecht Director, Summer Villages 4 months (elected Sept 2023)

Cathy Heron President 8 months (served to Sept 2023)

Angela Duncan Vice-President and Director, Villages and Summer Villages 6 months (resigned in June 2023)

Peter Brown Director, Cities up to 500,000 8 months (served to Sept 2023)

Bruce McLeod Director, Villages South 8 months (served to Sept 2023)

ADDITIONAL BOARDS SERVED ON

AMSC MUNIX

Alberta Police Interim Advisory Board

AMSC (appointed Oct 2023) MUNIX (appointed Oct 2023)

AMSC (appointed Oct 2023)

AMSC (appointed June 2023 and served to Sept 2023)

AMSC (resigned June 2023)

Alberta Police Interim Advisory Board (resigned June 2023)

AMSC (served to Sept 2023)

AMSC (served to Sept 2023) MUNIX (served to Sept 2023)

COMMITTEES SERVED ON PRIOR TO AGM (8 months)

Executive Infrastructure – Chair

Economic Strategy – Vice Chair

COMMITTEES SERVED ON POST AGM (8 months)

Infrastructure – Vice Chair

Economic Strategy –Vice Chair

Safe and Healthy Communities – Vice Chair

Small Communities – Vice Chair

Executive Human Resources

Executive (resigned June 2023)

Sustainability and Environment – Chair (resigned June 2023)

Infrastructure – Chair

Executive

Investment Advisory –Chair

Small Communities –Chair

Mike Pashak Director, Summer Villages 8 months (served to Sept 2023)

N/A

Small Communities – Vice Chair

1Amounts pertain to individuals who sit on Standing Committees but are not ABmunis Board members.

2Amounts pertain to individuals who sit on AMSC/AMSCIS Board & Standing Committees but are not an ABmunis Board member.

3Meeting expenses include items such as catering costs and venue rentals.

4Incurred on behalf of the Board but not attributable to a specific Board member.

FINANCIAL REPORTS

Consolidated Financial Statements of ASSOCIATION

OF ALBERTA MUNICIPALITIES

Year ended December 31, 2023

KPMG LLP

2200, 10175 – 101 Street

Edmonton, AB T5J 0H3

Canada

Telephone 780-429-7300

Fax 780-429-7379

INDEPENDENT AUDITOR’S REPORT

To the Members of the Association of Alberta Municipalities

Opinion

We have audited the consolidated financial statements of the Association of Alberta Municipalities (the “Association”), which comprise:

 The consolidated statement of financial position as at December 31, 2023

 the consolidated statement of operations for the year then ended

 the consolidated statement of change in net assets for the year then ended

 the consolidated statement of cash flows for the year then ended

 and notes to the consolidated financial statements, including a summary of material accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements, present fairly, in all material respects, the consolidated financial position of the Association as at December 31, 2023, and its consolidated results of operations, changes in its consolidated net assets and its consolidated cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of ours auditor’s report.

We are independent of the Association in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance with these requirements.

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

Other Information

Management is responsible for the other information. Other information comprises the information, other than the financial statements and the auditor’s report thereon, included in the 2023 Annual Report.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information, other than the financial statements and the auditor’s report thereon, included in the 2023 Annual Report as at the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report.

We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Association’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Association or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Association’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian general accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individual or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association’s internal control.

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

 Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Association's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Association to cease to continue as a going concern.

 Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Chartered Professional Accountants

Edmonton, Canada

June 3, 2024

ASSOCIATION OF ALBERTA MUNICIPALITIES

Consolidated Statement of Financial Position As at December 31, 2023, with comparative information for 2022

See accompanying notes to the

On behalf of the Board of Directors:

ASSOCIATION OF ALBERTA MUNICIPALITIES

Consolidated Statement of Operations

Year ended December 31, 2023, with comparative information for 2022

See accompanying notes to the consolidated financial statements.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Consolidated Statement of Changes in Net Assets Year ended December 31, 2023, with comparative information for 2022

See accompanying notes to the consolidated financial statements.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Consolidated Statement of Cash Flows

Year ended December 31, 2023, with comparative information for 2022

See accompanying notes to the consolidated financial statements.

(377,996) (67,477)

(168,310) (1,724,577) (10,425,665) (5,462,838)

$ 33,916,827

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

These consolidated financial statements consist of the assets, liabilities, net assets and operations of Association of Alberta Municipalities (“ABmunis”), its wholly owned subsidiary Alberta Municipal Services Corporation (“AMSC”), and AMSC Insurance Services Ltd. (“AMSCIS”), a wholly owned subsidiary of AMSC. Transactions between ABmunis and its subsidiaries, which are related parties, have been eliminated on consolidation. ABmunis also provides administration and agency services to Alberta Municipal Insurance Exchange (“MUNIX”) and APEX Supplementary Pension Plan whose results are not included in these consolidated financial statements.

ABmunis is a provincial organization that provides leadership in advocating local government interests to the provincial government and other organizations. AMSC and AMSCIS operate as business service delivery providers of shared corporate, networked products and services for municipalities and other local government entities. AMSC offers an energy retail program, an aggregated investment program, retirement services, and purchasing program services. AMSC also operates two commercial real estate properties. AMSCIS provides general insurance, employee group benefits and related coverage for the members of ABmunis.

ABMunis is a non-taxable association by virtue of section 149(1)(d.5) of the Income Tax Act.

1. Significant accounting policies:

These consolidated financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the CPA Canada Handbook ("Part III")

Significant accounting policies are as follows:

(a) Cash:

ABmunis considers deposits in the bank and deposits in the AMSC-administered High Interest Savings Account ("HISA") as cash. Cash held in the HISA earns interest at Canadian Western Bank's prime rate minus 1.65%.

(b) Deposits with property manager:

Deposits with property manager is cash held with a property management company for the purposes of managing the Alberta Municipal Place ("AMP") property.

(c) Other assets:

Other assets include payments for tenant improvements, leasing commissions, as well as deferred costs associated with the “step-up” features of the lease agreements signed with tenants of the managed property.

The tenant improvements and leasing commissions are amortized using the straight-line method over the applicable non-cancelable lease term and are recorded at the lower of cost less accumulated amortization and net realizable value.

The step-up leases stipulate that the rental rate will increase by predetermined amounts at various points in the future. Rental revenue is recognized on a straight-line basis over the lease term in accordance with Canadian generally accepted accounting principles for non-for-profit organizations in Part III; as such, a deferred rent asset equal to the difference between the actual rent received and the average rent over the lease term will build up in the first half of the lease term and then will be amortized into income over the latter part of the lease term, eventually being reduced to nil.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

1. Significant accounting policies (continued):

(d) Software service assets

ABmunis accounts for incurred costs related to the implementation of software accessed under cloud computing arrangements in accordance with Accounting Guideline AcG-20, “Customer’s Accounting for Cloud Computing Arrangements” (AcG-20).

ABmunis has capitalized the expenditures on implementation activities that are directly attributable to preparing the software service for its intended use as Software service assets on the Statement of Financial Position. The amount capitalized is expensed using a straight-line method over an expected period of access of the software service of 10 years and is reflected within systems and equipment maintenance on the Statement of Operations.

(e) Capital assets:

Capital assets are recorded at cost less accumulated amortization. Repairs and maintenance costs are charged to expense. Betterments which extend the estimated life of an asset are capitalized. The cost of a capital asset comprises its purchase price and any directly attributable cost of preparing the asset for its intended use.

When a capital asset no longer contributes to ABmunis's ability to provide services, its carrying amount is written down to its residual value.

Capital assets are comprised of the following:

(i) Tangible assets:

Amortization is provided for using the straight-line method at the following annual rates:

(ii) Intangible assets:

Intangible assets consist of acquired computer application software for daily operations. Amortization is provided for using the straight-line method at 10 - 33%, depending on the useful life of the asset.

(f) Revenue recognition:

ABmunis operates a group benefits plan providing benefits coverage for extended health care and dental policies on an Administrative Services Only ("ASO") program basis and providing insurance coverage for disability and life policies. ABmunis also operates an insurance plan providing insurance for liability, property, and automobile policies. Both ASO benefit premiums and commissions on insurance policies are recognized as revenue over the term of the related policy period.

ABmunis follows the deferral method of accounting for grant contributions. Restricted grant contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted grant contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is assured.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

1.

Significant accounting policies (continued):

(f) Revenue recognition (continued):

Agency and administration fees are recognized when services are performed.

Energy retail fees are earned on an energy consumption basis based on rates included in the Energy Member Master Agreements and are recorded as the energy is delivered. The energy retail fees include an estimate of the value of electricity and natural gas consumed by customers billed subsequent to the reporting period.

Rental revenue is recognized on a straight-line basis over the terms of the leases.

Clean Energy Improvement Program ("CEIP") program administration fees are recognized on a completed contract basis.

Interest, income on pooled investments, net realized gains and losses on sale of investments and net unrealized gains and losses (less transaction costs) are included in net investment income and are recognized on an accrual basis when earned. Investment income earned on restricted grant contributions is recorded as an increase to deferred contributions as accrued or as grant revenue, in accordance with the terms of the respective grant.

Membership fees are recognized at the beginning of each fiscal year when they are invoiced. Membership services are recognized when services are performed.

Convention and workshop revenues are recognized in conjunction with the occurrence of the event.

Revenues from fees related to CEIP service delivery, retirement services, investment management services, sustainability services and managed technology services are recognized when the services are performed.

Grant administration recoveries are recognized as revenue when the services have been provided.

Benefits surplus (deficit) on disability and life policies is recorded in the year in which the amount is fixed or determinable and settlement of the amount is reasonably assured.

(g) Investment in joint ventures:

ABmunis uses the equity method as the basis of accounting for its investment in joint ventures. Under the equity method, ABmunis records these investments initially at cost and the carrying values are adjusted thereafter to include the investor's pro rata share of post-acquisition excess of revenues over expenses of the investment. The adjustments are included in the determination of excess of revenues over expenses by the investor, and the investment accounts of the investor are also increased or decreased to reflect the investor's share of capital transactions and changes in accounting policies and corrections of errors relating to prior period financial statements applicable to post-acquisition periods. Distributions received or receivable from investees reduce the carrying values of the investments. Unrealized inter-entity gains or losses are eliminated.

(h) Provision for claims incurred but not reported:

The group benefits "ASO" program provides extended health and dental coverage. The incurred but not reported ("IBNR") provision is comprised of ASO claims estimated to be incurred in the year but not filed or reported to the administrator by the statement of financial position date. Claims incurred in the year must be filed with the program administrator within 180 days of year end. As such, the IBNR liability recorded in any given plan year has a limited extension life.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

1. Significant accounting policies (continued):

(h) Provision for claims incurred but not reported (continued):

The establishment of the provision for unpaid claims is based on known information and the interpretation of future circumstances and events and is influenced by a variety of factors. These factors include ABmunis's experience with historical claim submissions and payment trends, the deadline for claim submissions and an interpretation of past trends extending into the future.

Other factors include the continually evolving health and dental industry environment, actuarial studies, the quality of data used for projection purposes, existing claim management practices, including claim handling and settlement practices.

The process of determining the provision necessarily involves risks that the actual results could deviate, perhaps substantially, from the best estimates made.

The estimate of IBNR is generally subject to a greater degree of uncertainty than that for reported claims. The computation of these provisions takes into account the time value of money using discount rates based on projected investment income from the assets supporting these provisions.

The estimate of IBNR is reviewed annually by an actuary, and as adjustments to these liabilities become necessary, they are reflected in claim costs and claim administration expenses.

(i) Employee future benefits:

ABMunis provides pension benefits to its employees through the Local Authorities Pension Plan ("LAPP"), a provincial multi-employer defined benefit plan requiring both employer and employee contributions. Management employees also participate in the APEX Supplementary Pension Plan ("APEX"), which is a supplemental plan to LAPP, and a provincial multi-employer defined benefit plan established under the Alberta Employment Pension Plans Act requiring both employer and employee contributions. LAPP and APEX are accounted for as defined benefit plans.

ABmunis has entered into a Master Investment Agent Service Agreement with an investment manager to facilitate the delivery of Investment Agent Services for Supplemental Employee Retirement Plans ("MuniSERP"). The plan provides enhanced retirement benefits covering executive employees who cannot, under the Income Tax Act pension limits, accrue a full 2.0% benefit rate on their earnings. The benefit is based on years of service, the employee's final average earnings and a 2.0% benefit rate offset by corresponding LAPP and APEX benefits. ABMunis accrues its obligations under MuniSERP as the employees render the services necessary to earn the retirement benefits.

ABMunis accounts for MuniSERP using the immediate recognition method. Under this approach, the accrued benefit obligation at the end of the year is determined based on the most recent actuarial valuation report. The measurement date of the accrued benefit obligation coincides with ABMunis’s fiscal year-end. The most recent actuarial valuation of the accrued benefit obligation was as of December 31, 2023, and the next valuation will be as of December 31, 2024. The obligation is unfunded.

At year-end, ABMunis recognizes the accrued benefit obligation in the statement of financial position. Payments made during the course of the year are a reduction to the actuarial obligation. Past service costs arising from plan amendments are immediately recognized into income at the date of the amendment.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

1. Significant accounting policies (continued):

(j) Financial instruments:

Financial instruments are recorded at fair value on initial recognition and are subsequently recorded at cost or amortized cost unless management has elected to carry the instruments at fair value. Management has elected to carry investments at fair value.

Transaction costs incurred including investment management fees on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred. All other financial instruments are adjusted by transaction costs incurred on acquisition and financing costs, which are amortized using the straight-line method.

Financial assets are assessed for impairment on an annual basis. If there is an indicator of impairment, ABmunis determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset. If there is a significant adverse change in the expected cash flows, the carrying value of the financial asset is reduced to the highest of the present value of the expected cash flows, and the amount that could be realized from selling the financial asset or the amount ABmunis expects to realize by exercising its right to any collateral. If events and circumstances reverse in a future period, an impairment loss will be reversed to the extent of the improvement, not exceeding the initial carrying value.

(k) Use of estimates:

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Significant items subject to such estimates and assumptions include the energy purchase accrual and the IBNR liability. Actual results could differ from those estimates.

2. Restricted cash:

Where required by contract agreements, ABmunis receives cash deposits from certain municipalities participating in the Clean Energy Improvement Program as an advance on projectrelated payments to be made by ABmunis on behalf of the participating municipalities. Funds are held in separate, non-interest bearing bank accounts, each designated as a deposit account for the respective municipality. Cash is transferred to the general operating account as required to reimburse ABmunis for payments made on behalf of those municipalities.

ABmunis holds cash on deposit for members who participate in a defined contribution pension plan. Cash is received from the participants and ABmunis subsequently transfers this cash to the plan fund holder. The cash is held in a separate bank account that is designated as a deposit account for the plan participants. A corresponding liability is included in accounts payable. December 31, 2023 2022

Cash held on deposit for CEIP participants $ 6,749,934 $ 2,227,281

Cash held on deposit for pension plan participants 191,374 153,994

Total cash held on deposit 6,941,308 2,381,275

Cash held in support of internally restricted net asset balances 4,718,162 — $ 11,659,470 $ 2,381,275

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

3.

ASO funds held on deposit and ASO funds payable:

ABmunis assumes the underwriting risk for extended health care and dental policies under the ASO program, and engages a third party administrator to manage the claim activities.

ASO funds held on deposit, classified as non-current on the statement of financial position, are held by the claims administrator and comprise the minimum deposit required by the administrator. These funds are interest bearing at the bank's 90 day treasury bill rate less 0.5% (2022 - 0.5%).

Interest earned on ASO funds held on deposit is recorded as a reduction in ASO claim costs and claim administration expenses on the statement of operations.

ASO funds payable of $461,689 (2022 - $739,191) consist of health and dental claims costs owing.

4. Investments:

ABmunis's investments are held in managed investment funds and guaranteed investment certificates.

The guaranteed investment certificates bear interest at 5.69% for a term of one year which expires in November 2024.

As at December 31, 2023, $3,998,236 (2022 - $3,297,447) of these investments are restricted in accordance with ABmunis' net asset policy (see note 13).

5. Investment in and advances to AEOEPC:

Alberta Elected Officials Education Program Corporation ("AEOEPC") is a joint venture by two equal shareholders, ABmunis and Rural Municipalities of Alberta ("RMA"). AEOEPC provides a comprehensive program of study for elected municipal officials in the province of Alberta.

AEOEPC was incorporated under the Business Corporations Act of Alberta It is a non-taxable corporation by virtue of section 149(1)(d.6) of the Income Tax Act.

Investment in and advances to AEOEPC is made up of the following items:

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

5. Investment in and advances to AEOEPC (continued):

During the year ended December 31, 2023, AEOEPC recorded excess of revenues over expenses of $42,748 (2022 - $64,642) of which $21,374 (2022 - $32,321) has been reported as a share of revenues over expenses of AEOEPC by ABmunis. The financial statements of AEOEPC are available upon request and the significant accounting policies of AEOEPC conform with those of ABmunis.

Financial summaries of AEOEPC as at December 31 and for the years then ended are as follows:

position:

6. Other assets:

As manager of the AMP property, ABmunis entered into lease agreements with tenants of this property. These agreements required ABmunis to fund tenant improvements and to pay leasing commissions to the leasing agents involved in arranging the agreements. In addition, there is deferred rent associated with the “step-up” features of the lease agreements signed with tenants.

For the year ended December 31, 2023, amortization of $52,267 (2022 - $38,832) related to tenant improvements and leasing commissions was included in rental properties expense.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

7. Software service assets:

For the year ended December 31, 2023, amortization of $333,452 related to software service assets was included in systems and equipment maintenance (2022 - $163,679).

8. Capital assets:

9. Provision for claims incurred but not reported:

The IBNR provision has been calculated using IBNR factors developed through review of runoff claims and analysis of paid and incurred claims. The actuarial methodology has not changed from prior year. These IBNR factors are applied to extended health and dental claims paid in the 12 month period prior to the IBNR calculation date of December 31, 2023 to determine the recommended IBNR reserve before margin adjustments. Margin adjustments, consisting of provisions to account for expenses (costs of administration and claims adjudication) and a provision for adverse deviation (PfAD), are then added to the IBNR reserves as calculated.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements Year ended December 31, 2023

9. Provision for claims incurred but not reported (continued):

The table below outlines the assumptions used in calculating the IBNR provision:December 31, 2023

Health

IBNR factor (as % of total actual claims)

Margin applied (as a % of IBNR reserves):

Dental

(as a % of IBNR reserves):

10. Deferred contributions:

Deferred contributions represent unspent resources that are externally restricted for special projects Changes in deferred contribution balances are as follows:

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements Year ended December 31, 2023

10. Deferred contributions (continued):

the year ended December 31, 2022

1. Grant funds received for municipalities that did not hold an eligible event have been transferred to accounts payable for repayment to the grantor, the Alberta Ministry of Culture.

11. Pension and retirement plans:

During the year ended December 31, 2023, ABMunis made employer contributions to two pension plans, totaling $1,041,770 (2022 - $982,786), as follows:

LAPP Contribution rates: on

on

LAPP

YMPE, up to salary

APEX Contribution rate3:

Total APEX contributions $ 109,260 $

Total contributions to pension plans $ 925,204 $1,041,299

1. Early Maximum Pensionable Earnings (YMPE) for 2023 = $66,600 (2022 - $64,900)

2. LAPP salary cap for 2023 = $195,314 (2022 - $190,470)

3. Contributed on pensionable earnings up to $175,333 (2022 - $171,000)

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements Year ended December 31, 2023

11. Pension and retirement plans (continued):

Contributions made by ABmunis on behalf of employees are included in salaries and benefits expense. There is no future accrued liability obligation in reference to LAPP or APEX.

The actuarial liability of ABMunis’s MuniSERP retirement plan as described in note 1 is as follows: December 31, 2023 2022

The significant actuarial assumptions used in measuring ABmunis's accrued benefit obligations are as follows:

12. Invested in capital and software service assets:

Change in invested in capital and software service assets is calculated as follows: 2023 2022

Excess of revenues over expenses:

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

13. Internally restricted net assets:

The purpose of ABmunis net asset policy is to build reserves to ensure the sustainability of ABMunis's operations. These amounts are not available for other purposes without approval of the Board of Directors.

The following reserves are included in internally restricted net assets as at December 31:

– to set aside surpluses arising from the ASO and the group benefits insurance program for potential future deficits

– to fund unanticipated expenditures and losses Program Development Reserve

2,000,000 – to fund the development of new programs or the acquisition of an organization Advocacy Reserve 3,425,000 2,189,000 – to fund unanticipated or emerging advocacy-related expenditures

Technology Reserve 3,000,000 — – to fund unexpected technology-related expenditures

Member Reserve 2,932,557 — – to fund grants, awards, or bursaries provided to members, as authorized by the Board

to fund unexpected capital expenditures

to fund unexpected deficits arising from the annual convention and tradeshow event

– to fund sustainability services capacity building and programming activities $ 42,993,324 $ 23,720,464

During the year ended December 31, 2023, the Board of Directors approved transfers of $19,272,860 from unrestricted net assets to fund these reserves (2022 - $8,409,269).

ABmunis' net asset policy requires that a balance be maintained in restricted cash or investment funds equal to or greater than the balance in internally restricted reserves. As at December 31, 2023, $4,718,162 of cash and $3,998,236 of investments are restricted to support these internally restricted net asset balances (2022 - $--- of cash and $3,297,447 of investments).

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

14. Insurance agency commissions:

ABmunis operates a group benefit plan providing insurance coverage for extended health care, disability and life policies. ABmunis also operates an insurance plan providing insurance for liability, property, aviation and automobile policies. ABmunis engages third party administrators to manage claim activity.

Commissions represent the net of insurance premiums billed less amounts due to insurance underwriters and are as follows:

15. Energy retail fees:

ABmunis operates an energy retail program providing electricity and natural gas. ABmunis engages a third party administrator to manage the distribution of the commodities and customer billing activity. Transactions under this program during the year were as follows:

16. MuniSERP administration fee:

ABmunis received a flat service fee of $42,475 (2022 - $40,070) for coordinating actuarial services and holding investments as an agent on behalf of program subscribers. The MuniSERP administration fee is recorded in retirement services revenue. At December 31, 2023, ABmunis holds $6,840,403 (December 31, 2022 - $6,189,808) in trust on behalf of program subscribers.

17. Clean energy improvement program:

ABmunis administers a Clean Energy Improvement Program providing assistance for municipalities with the implementation of clean energy improvement projects. Initial development of the program is funded by a grant from Alberta Environment and Parks to ABmunis. Included in grant revenue for the year ended December 31, 2023 is $963,241 related to CEIP (2022 - $670,790).

Clean Energy Improvement Program revenue includes the following:

December 31, 2022

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

18. Net investment income (loss):

investment income (loss) is comprised of:

19. ASO claim costs and claim administration expenses:

20. Grants:

Grants include expenditures on the following items:

21. Benefits surplus:

ABmunis partners with a third party provider, as the insurer of its group benefits program, related to the coverage of group life and disability insurance. The insurer's role is to underwrite and adjudicate these coverages, with ABmunis acting in the client service role. The benefits are underwritten on a refund accounting basis, meaning that after the insurer has funded its necessary reserves, the remaining surplus is available for refund to ABmunis, or if in deficit ABmunis must remit the amount to the third party provider. Benefit premiums of $17,156,805 were collected and remitted to the insurer during the year (2022 - $15,791,661).

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

22. Related party transactions:

MUNIX is a self-insurance exchange for members of ABmunis. MUNIX was formed under the Reciprocal Insurance Exchange Agreement for Municipalities in the province of Alberta, dated January 1, 2002, by various municipalities subscribing to the agreement. ABmunis administers MUNIX and therefore is a related party.

APEX was established on January 1, 2003 to enhance and supplement LAPP for eligible staff of participating municipalities in Alberta. It is a voluntary, contributory, defined benefit pension plan. ABmunis is the sponsor of APEX and appoints members of the APEX Board of Governors. ABmunis administers APEX and therefore is a related party.

AEOEPC is a joint venture and therefore is a related party.

The following balances are outstanding with related parties as at December 31:

Included in accounts receivable, due from:

Included in accounts payable, due to:

The following transactions with the related parties occurred during the year ended December 31:

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

23. Credit facilities:

In October 2023, ABmunis executed a credit facilities agreement secured by a collateral mortgage on the AMP land and building, and general security agreements signed by ABmunis, AMSC and AMSCIS.

The following credit facilities are available under this agreement:

AMSC

a. $100,000 non-revolving, demand facility by way of letters of credit, for the purpose of fulfilling regulatory requirements as an accredited energy retailer in the province of Alberta. Interest is at the lender's prime rate.

b. $4,000,000 revolving, demand overdraft facility by way of risk-based pricing loans and overdrafts, for use as an operating line of credit. There is no minimum retained balance required, interest is at the lender's prime rate and the facility revolves in increments of $10,000

c. $30,000,000 non-revolving demand facility by way of letters of credit, for the purpose of fulfilling energy retailer requirements. Interest is at the lender's prime rate.

The AMSC facilities are secured by guarantees and postponement of claim agreements by both ABmunis and AMSCIS, as well as a pledge of $5,000,000 cash collateral in favour of the lender.

As at December 31, 2023, no amounts have been drawn on the overdraft facility and $17,400,100 in letters of credit were issued and outstanding.

ABmunis

a. $3,000,000 revolving, demand overdraft facility by way of risk-based pricing loans and overdrafts for use as an operating line of credit. There is no minimum retained balance required, interest is at the lender's prime rate and the facility revolves in increments of $10,000.

b. $75,000 corporate credit card expense facility

The ABmunis facilities are also secured by guarantees and postponement of claim agreements signed by both AMSC and AMSCIS. As at December 31, 2023, no amounts had been drawn on the above noted facilities.

24. Commitments:

ABmunis has an agreement for property management services with a third party for the AMP property. The agreement requires payments of the greater of 4% of the gross receipts from the AMP property or $4,000 per month. The agreement continues from year to year unless either party delivers 60 days notice.

ABmunis has an agreement with a third party to maintain and operate an energy retailing system that commenced January 1, 2024 and expires on December 31, 2028. The agreement will average $53,000 per month, with a minimum monthly fee of $25,000.

ABmunis has entered into a licensing agreement for group benefits plan administration software, expiring October 1, 2026. The minimum monthly licensing commitment under this agreement is $36,900.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

24. Commitments (continued):

ABmunis has entered into a licensing agreement for general insurance administration software, expiring October 22, 2026, and the maximum annual commitment is $349,325 U.S. dollars.

ABmunis has entered into an agreement for consulting services relating to its group benefits plan. This agreement has no expiry term, and the maximum annual commitment is $200,000

ABmunis has entered into an agreement for insurance brokerage services for its general insurance program. The agreement expires on June 30, 2024 and the maximum annual commitment is $300,000.

ABmunis has an agreement with an energy producer to purchase a fixed quantity of electricity over a five year term beginning January 1, 2024.

ABmunis has entered into a Financial Letter of Agreement with a group benefits plan administrator whereby, in the event of termination of the group benefits plan, ABmunis is required to pay an amount equal to the accumulated plan deficit at the time of termination, up to 25% of the annualized premium. The Agreement continues from year to year unless either party delivers the prescribed notice to terminate. The Agreement has not been terminated and there is no obligation at December 31, 2023.

25. Subsequent event

Effective January 1, 2024, ABmunis was granted status as an energy retailer of record in the province of Alberta.

26. Financial risks and capital management:

(a) Currency risk:

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates.

ABmunis is exposed to currency risk as a result of exchange rate fluctuations and the volatility of these rates. In the normal course of business, ABmunis procures information technology support services in U.S. dollars and holds global investments including holdings denominated in U.S. dollars. ABmunis does not currently enter into forward contracts to mitigate this risk.

There has been no change to currency risk from the prior year.

(b) Liquidity risk:

Liquidity risk is the risk that ABmunis cannot meet its obligations as they become due. ABmunis manages its liquidity risk by monitoring its operating requirements, and by preparing and monitoring budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations. In accordance with ABmunis' net asset policy, internal restrictions are placed on certain net assets to ensure reserve funding is available for future or unexpected expenditures.

The execution of the joint credit agreement and issuance of guarantees as security for AMSC's obligations will increase ABmunis liquidity risk after January 1, 2024 when the obligations come into effect.

There has been no change to liquidity risk from the prior year.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

26. Financial risks and capital management (continued):

(c) Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. ABmunis is exposed to credit risk with respect to cash on deposit, deposits with property manager, ASO funds held on deposits, investments and accounts receivable.

ABMunis's accounts receivable consist primarily of amounts due from various provincial municipalities who are members of ABMunis, and billed and unbilled energy retail fees from municipalities participating in the energy retail program. ABmunis assesses accounts receivable on a continuous basis, and provides for any amounts that are not collectible in the allowance for doubtful accounts.

Cash, deposits with property manager, and ASO funds on deposit are maintained with federally regulated financial institutions.

Investments include domestic and foreign debt and equity based pooled funds, which are widely held and diversified. Fair value is based on the underlying securities held by the funds which are of commercial and government grade bonds, debentures, mortgage funds and shares of publicly traded companies whose shares are traded on domestic and global exchanges. Changes in the credit quality of bond issuers can result in a change in fair value.

There has been no change to credit risk from the prior year.

(d) Interest rate risk:

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk arises on interest-sensitive financial instruments which include cash held in the HISA, the short-term bond and mortgage fund, the mortgage pension trust, guaranteed investment certificates, the longterm bond fund, and credit facilities.

There has been no change to interest rate risk from the prior year.

(e) Market rate risk:

Market risk is the risk of adverse financial impact as a consequence of market movements such as currency exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of the assets held and the value of liabilities.

Investments in Canadian and global equity funds, and bond and mortgage funds are subject to fair value fluctuation of underlying securities held by the funds traded on domestic and global exchanges. Changes in the foreign exchange rates and market prices can result in a change in fair value.

There has been no change to market risk from the prior year.

ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2023

26. Financial risks and capital management (continued):

(f) Capital management:

The Board of Directors' objectives in managing its capital is to ensure ABmunis has adequate financial resources - both liquid and long term - to meet all its obligations in a timely manner and to sustain its operations. ABmunis manages capital with effective business planning and budgeting, and manages operations and capital expenditures according to the plan approved by the Board of Directors. In accordance with the net asset policy, the Board of Directors establishes and builds internally restricted reserves within its net assets to ensure the sustainability of operations.

There has been no change in ABmunis' approach to capital management during the year.

27. Comparative information:

Certain comparative information has been reclassified to conform to the financial statement presentation adopted for the current year.

Financial

Statements of

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Year ended December 31, 2023

KPMG LLP

2200, 10175 – 101 Street

Edmonton, AB T5J 0H3

Canada

Telephone 780-429-7300

Fax 780-429-7379

INDEPENDENT AUDITOR’S REPORT

To the Subscribers of Alberta Municipal Insurance Exchange and the Alberta Superintendent of Insurance

Opinion

We have audited the financial statements of Alberta Municipal Insurance Exchange (the “Entity”), which comprise:

 the statement of financial position as at December 31, 2023

 the statement of comprehensive loss for the year then ended

 the statement of changes in subscribers’ surplus for the year then ended

 the statement of cash flows for the year then ended

 and notes to the financial statements, including a summary of material accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements, present fairly, in all material respects, the financial position of the Entity as at December 31, 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards.

Basis

for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our auditor’s report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance with these requirements.

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

Emphasis of Matter – Change in Accounting Policies and Comparative Information

We draw your attention to Note 5 of the financial statements (“Note 5”), which explains the impact as at January 1, 2023 as a result of a full retrospective adoption of a change in accounting policy with respect to IFRS 9.

We also draw attention to Note 5, which explains that certain comparative information presented were adjusted as a result of a full retrospective adoption of a change in accounting policy, with respect to IFRS 17:

 as at and for the year ended December 31, 2022 has been adjusted

 as at January 1, 2022 has been derived from the financial statements for the year ended December 31, 2021 which have been adjusted (not presented herein).

Note 5 explains the reason for the adjustments.

Our opinion is not modified in respect of this matter.

Other Matter – Change in Accounting Policies and Comparative Information

As part of our audit of the financial statements for the year ended December 31, 2023, we audited the adjustments that were applied to subscribers’ surplus as at January 1, 2023.

As part of our audit of the financial statements for the year ended December 31, 2023, we also audited the adjustments that were applied to adjust certain comparative information presented:

 as at and for the year ended December 31, 2022

 as at January 1, 2022

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with 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.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian general accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individual or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.

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

 Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

 Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Chartered Professional Accountants

Edmonton, Canada

February 27, 2024

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Statement of Financial Position

See accompanying notes to the financial statements.

On behalf of the Advisory Board:

31, 2023 December 31, 2022

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Statement of Comprehensive Loss For the year ended December 31, 2023 with comparative information for 2022

See accompanying notes to the financial statements.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Statement of Changes in Subscribers' Surplus

For the year ended December 31, 2023, with comparative information for 2022

(in thousands)

Balance at January 1, 2022, as previously reported $

Adjustment on initial application of IFRS 17 4, 5

Restated balance at January 1, 2022

Comprehensive loss for the year ended December 31, 2022 (restated) 4, 5 (4,902)

Restated balance at December 31, 2022 31,529

Comprehensive loss for the year ended December 31, 2023 (3,112)

Balance at December 31, 2023 $ 28,417

See accompanying notes to financial statements.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Statement of Cash Flows

For the year ended December 31, 2023, with comparative information for 2022

See accompanying notes to the financial statements.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

1. Reporting entity:

Alberta Municipal Insurance Exchange (the "Exchange") was formed on January 1, 2002 under the Reciprocal Insurance Exchange Agreement for Municipalities in the province of Alberta and the Insurance Act (the "Act"). Its registered office is located at 300, 8616 - 51 Avenue, Edmonton, Alberta, Canada T6E 6E6.

The Exchange commenced operations on January 1, 2002 and has 734 (2022 - 728) subscribers. Subscriptions to the Exchange are renewed annually on a rollover basis. The next date for renewal of policies is January 1, 2024.

The Act permits a group of subscribers to exchange reciprocal contracts or inter-insurance with each other through a principal attorney. The principal attorney is authorized by the subscribers under a power of attorney, to sign reciprocal contracts on their behalf and to act on the subscribers' behalf in respect of any matter specified in the power of attorney related to those contracts.

The Exchange is established for the purpose of permitting the subscribers to exchange a reciprocal contract or inter-insurance as provided for in the Act. The subscribers to the Exchange are various Association of Alberta Municipalities ("ABmunis") members subscribing to the Reciprocal Insurance Exchange Agreement for Municipalities in the province of Alberta dated January 1, 2002.

The affairs of the Exchange are governed by an advisory board established in accordance with the power of attorney.

The majority of the advisory board members are directors of ABmunis whose municipalities are subscribers of the Exchange. AMSC Insurance Services Ltd. ("AMSCIS"), a wholly owned subsidiary of ABmunis, acts as an agent of the Exchange.

2. Basis of presentation:

(a) Statement of compliance:

The financial statements have been prepared in accordance with IFRS Accounting Standards and comply with the requirements for filing with the Superintendent of Insurance for the Province of Alberta.

The financial statements were authorized for issue by the advisory board on February 21, 2024.

Details of the Exchange's material accounting policies are included in Note 12.

This is the first set of the Exchange's annual financial statements in which IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments have been applied. The related changes to significant accounting policies are described in Note 5.

(b) Basis of measurement:

The financial statements have been prepared on the historical cost basis, except for the following items, which are measured on the following alternative basis on each reporting date:

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

(c) Functional and presentation currency:

The financial statements are presented in Canadian dollars, which is the Exchange’s functional currency. All amounts have been rounded to the nearest thousand dollars, unless otherwise indicated.

3. Use of judgments and estimates:

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

Judgments

Information about judgments made in applying accounting policies that have the most significant effect on amounts recognized in the financial statements is included in the following notes:

• Note 12(a)(i) – classification of insurance and reinsurance contracts: assessing whether the contract transfers significant insurance risk;

• Notes 8(c)(i) and 12(a)(ii) – level of aggregation of insurance and reinsurance contracts: identifying portfolios of contracts and determining groups of contracts that are onerous on initial recognition and those that have no significant possibility of becoming onerous subsequently;

• Notes 8(c)(i) and 12(a)(v) – measurement of insurance and reinsurance contracts: determining the techniques for estimating risk adjustments for non-financial risk and the coverage units provided under a contract; and

• Notes 5 and 12(a)(viii) – transition to IFRS 17: determining whether sufficient reasonable and supportable information is available to apply a full retrospective approach

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying value of assets and liabilities in the next financial year is included in the following notes:

• Note 6(d) and 12(b)(iii) - impairment of financial assets

Information about assumptions made in measuring insurance and reinsurance contracts is included in Note 8(c). Changes in the assumptions about claims development and discount rates (including any illiquidity premiums) may result in a material change to fulfilment cash flows in 2024. However, these changes would not affect the carrying amount of the contracts, unless they arise from onerous contracts.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

4. Role of the actuary and auditors:

The actuary is appointed by the advisory board of the Exchange and is responsible for ensuring that the assumptions and methods for the valuation of the insurance contract liabilities are in accordance with accepted actuarial practice, applicable legislation and associated regulations and directives. The actuary is required to provide an opinion on the appropriateness of the insurance contract liabilities at the statement of financial position date to meet all policyholder obligations of the Exchange. The work to form that opinion includes an assessment of the sufficiency and reliability of policy data and an analysis of the ability of the assets to support the insurance contract liabilities. In carrying out this assessment, the actuary makes use of the work of the external auditor with respect to tests of the data used in the valuation. The actuary's report outlines the scope of their work and opinion. The actuary is also required each year to analyze the financial condition of the Exchange and prepare a report for the advisory board.

The external auditors have been appointed by the advisory board of the Exchange pursuant to the Act to conduct an independent and objective audit of the financial statements of the Exchange in accordance with Canadian generally accepted auditing standards and to report thereon to the subscribers. In carrying out their audit, the auditors also make use of the work of the actuary and their report on the Exchange's policy liabilities. The auditors' report outlines the scope of their audit and their opinion.

5. Changes in significant accounting policies

The Exchange has initially adopted IFRS 17 and IFRS 9, including any consequential amendments to other standards from January 1, 2023. This standard has brought significant changes to the accounting for insurance and reinsurance contracts and financial instruments. As a result, the Exchange has restated certain comparative amounts and presented a third statement of financial position as at January 1, 2022.

Except for the changes below, the Exchange has consistently applied the accounting policies as set out in Note 12 to all periods presented in these financial statements.

The nature and effects of the key changes in the Exchange's accounting policies resulting from its adoption of IFRS 17 and IFRS 9 are summarized below.

(a) IFRS 17 Insurance Contracts

(i) Recognition, measurement and presentation of insurance contracts

IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts and reinsurance contracts. It introduces a model that measures groups of contracts based on the Exchange’s estimates of the present value of future cash flows that are expected to arise as the Exchange fulfills the contracts, an explicit risk adjustment for non-financial risk and a Contractual Service Margin (CSM).

Under IFRS 17, insurance revenue in each reporting period represents the changes in the liabilities for remaining coverage that relate to services for which the Exchange expects to receive consideration and an allocation of premiums that relate to recovering insurance acquisition cash flows.

Insurance finance income and expenses are presented separately from insurance revenue and insurance service expenses.

The Exchange applies the Premium Allocation Approach (PAA) to simplify the measurement of insurance contracts. When measuring liabilities for remaining coverage, the PAA is similar to the Exchange’s previous accounting treatment. When measuring liabilities for incurred claims, the Exchange discounts the future cash flows (unless they are expected

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

to occur in one year or less from the date on which the claims are incurred) and includes an explicit risk adjustment for non-financial risk.

Income and expenses from reinsurance contracts other than insurance finance income and expenses are now presented as a single net amount in profit or loss. Previously, amounts recovered from reinsurers and reinsurance expenses were presented separately.

For an explanation of how the Exchange accounts for insurance and reinsurance contracts under IFRS 17, see Note 12(a).

(ii) Transition

Changes in accounting policies resulting from the adoption of IFRS 17 have been applied using a full retrospective approach to the extent practicable. Under the full retrospective approach, at January 1, 2022, the Exchange:

• identified, recognized and measured each group of insurance and reinsurance contracts as if IFRS 17 had always been applied;

• derecognized previously reported balances that would not have existed if IFRS 17 had always been applied. These included some insurance receivables and payables. Under IFRS 17, they are included in the measurement of the insurance contracts; and

• recognized any resulting net difference in subscribers surplus.

The Exchange has applied the transition provisions in IFRS 17 and has not disclosed the impact of the adoption of IFRS 17 on each financial statement line item. The effects of adopting IFRS 17 on the financial statements at January 1, 2022 are presented in the statement of changes in subscribers' surplus.

(b) IFRS 9 Financial Instruments

(i) Classification of financial assets and financial liabilities

IFRS 9 includes three principal classification categories for financial assets: measured at amortized cost, measured at fair value recognized through profit or loss (FVTPL), and measured at fair value recognized through other comprehensive income (FVOCI). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held-to-maturity investments, loans and receivables, and available-for-sale financial assets.

For an explanation of how the Exchange classifies and measures financial assets and accounts for related gains and losses under IFRS 9, see Note 12(b)(ii).

IFRS 9 has not had a significant effect on the Exchange’s accounting policies for financial liabilities.

(ii) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ model. The new impairment model applies to financial assets measured at amortized cost. Under IFRS 9, credit losses are recognized earlier than under IAS 39 (see Note 12(b)(iii).

(iii) Transition

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

• Information about financial instruments that had already been derecognized at 1 January 2023 continues to be reported in accordance with IAS 39 for the comparative period.

• The following assessments have been made on the basis of the facts and circumstances that existed at 1 January 2023.

◦ The determination of the business model within which a financial asset is held.

◦ The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

• If a financial asset had low credit risk at 1 January 2023, then the Exchange determined that the credit risk on the asset had not increased significantly since initial recognition.

As permitted by IFRS 7, the Exchange has not disclosed information about the line item amounts that are reported in accordance with the classification and measurement (including impairment) requirements of IFRS 9 for 2022 and those that would have been reported in accordance with the classification and measurement requirements of IAS 39 for 2023.

With the application of IFRS 9, financial assets previously designated as loans and receivables under IAS 39 (cash and cash equivalents, and accounts receivable) were redesignated as financial assets to be measured at amortized cost. This change did not result in a change to the carrying value recorded.

The Exchange's financial investments, which include debt and equity securities and treasury bills, have been designated as FVTPL under IFRS 9. This is consistent with previous treatment under IAS 39, and no adjustment to carrying value was required upon transition to IFRS 9.

There is no change to the classification of accounts payable under IFRS 9, which the Exchange have classified as a financial liability to be measured at amortized cost.

6. Risk and capital management:

The Exchange's advisory board has overall responsibility for the establishment and oversight of the Exchange's risk management framework. The primary goals of the Exchange’s financial risk management are to ensure that the outcomes of activities involving elements of risk are consistent with the Exchange’s objectives and risk tolerance, and to maintain an appropriate risk/ reward balance while protecting the Exchange’s statement of financial position from events that have the potential to materially impair its financial strength. Balancing risk and reward is achieved through aligning risk appetite with business strategy, diversifying risk, pricing appropriately for risk, mitigating risk through preventative controls and transferring risk to third parties. The Exchange’s exposure to potential loss from financial instruments is primarily due to underwriting risk along with market, credit, liquidity and capital management risks.

(a) Key risks arising from insurance contracts issued:

The nature and extent of the underwriting and financial risks arising from the insurance contracts issued by the Exchange are determined by the contract design. The risks are evaluated for risk management purposes in conjunction with the risks mitigated by related reinsurance contracts and the risks arising from financial assets held to fund the settlement of the liabilities. The extent to which profit or loss and equity in any period are sensitive to financial risks depends on the

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

extent to which they are economically hedged or borne by contract holders and the extent of any mismatches inherent in the accounting policies adopted by the Exchange.

The key risks arising from property and casualty insurance contracts issued by the Exchange are the unknown frequency and severity of claims, which are influenced by the nature of the risks covered and the geographic location in which the risks are written.

For property, the frequency and severity of claims are affected by the occurrence of extreme weather events (e.g. floods, wildfires and hurricanes) and other natural catastrophes (e.g. earthquakes). Increasing climate risk could potentially introduce material uncertainty in assumptions and result in inaccurate pricing of insurance risk.

For casualty, the severity of claims is significantly affected by increases in the value of settlements awarded. The nature and frequency of claims may be affected by emerging trends.

(b) UNDERWRITING RISK

Underwriting risk is the risk that the total cost of claims and other expenses will exceed premiums received. Underwriting risk comprises insurance risk and expense risk.

• Insurance risk: the risk transferred from the policyholder to the Exchange (other than financial risk) which arises from the inherent uncertainty about the occurrence, amount or timing of claims. Insurance risk comprises pricing risk, reserving risk, and catastrophic loss risk

• Expense risk: the risk of unexpected increases in the administrative costs associated with the servicing of a contract (rather than in the costs associated with insured events).

(i) Management of underwriting risk

The advisory board sets the Exchange’s strategy for accepting and managing underwriting risk. Specific underwriting objectives – e.g. aggregation limits, reinsurance protection thresholds and line of business diversification parameters – are prepared and reviewed by the Exchange’s principal attorney. The advisory board continuously reviews its underwriting strategy in the light of evolving market pricing and loss conditions and as opportunities present themselves.

A key component of the management of underwriting risk for the Exchange’s products is a disciplined underwriting strategy that is focused on writing quality business. Product pricing is intended to incorporate appropriate premiums for each type of assumed risk. The underwriting strategy includes underwriting limits on the Exchange’s total exposure to specific risks.

The insurance contracts issued by the Exchange are renewable annually. The ability to reprice contracts on renewal in response to changes in policyholder risk profiles, claims experience and market considerations is a significant mitigant to pricing risk. Contracts may also contain other features that constrain underwriting risk – e.g. the use of deductibles and capping on the maximum permitted loss or number of claims (subject to local regulatory and legislative requirements).

The Exchange uses historical claims experience, industry trends, and personal renewal questionnaire to assess risk exposure and endeavour to optimize the pricing of insurance contracts. The possibility of weather-related calamities is built into pricing, considering trends in historical data and leading indicators of climate risk. In retail and commercial property, the Exchange leverages advanced analytics (e.g. flood mapping) for identifying properties most at risk and improving risk selection.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

The Exchange uses excess of loss reinsurance to mitigate the risk of incurring significant losses linked to single events. Certain subscribers are required to protect against catastrophe events in accordance with local regulatory requirements. Where an individual exposure exceeds the Exchange’s risk appetite, additional facultative insurance is purchased through AMSCIS for sale to subscribers.

Pricing risk:

Pricing risk arises when actual claims experience differs from the assumptions included in pricing calculations. Historically, the underwriting results of the property and casualty industry have fluctuated significantly due to the cyclical nature of the insurance market. The market cycle is affected by the frequency and severity of losses, levels of capacity and demand, general economic conditions and price competition. The Exchange focuses on prudent rate setting that considers the requirements for claim aggregates, planned expenses, funding objectives, investment returns, and the current funding status of the Exchange. The pricing process is designed to ensure an appropriate return on capital while also providing long-term rate stability. These factors are set in conjunction with the actuary, and are reviewed and adjusted periodically to ensure they reflect the current environment.

There has been no change to pricing risk from the prior year.

Reserving risk:

Reserving risk arises due to the length of time between the occurrence of a loss, the reporting of the loss to the insurer and ultimate resolution of the claim. Claim provisions are expectations of the ultimate cost of resolution and administration of claims based on an assessment of facts and circumstances then known, a review of historical settlement patterns, estimates of trends in claims severity and frequency, legal theories of liability and other factors.

Variables in the reserve estimation process can be affected by receipt of additional claim information and other internal and external factors, such as changes in claims handling procedures, economic inflation, legal and judicial trends, legislative changes and changes in severity or frequency of claims relative to historical trends. Due to the amount of time between the occurrence of a loss, the actual reporting of the loss and the ultimate payment, provisions may ultimately develop differently from the actuarial assumptions made when initially estimating the provision for claims. The Exchange’s provision for claims is reviewed separately by, and must be acceptable to a third party claims adjuster, an internal claims manager, and the independent appointed actuary.

There has been no change to reserving risk from the prior year.

Catastrophic loss risk:

Catastrophic loss risk is the exposure to losses resulting from multiple claims arising out of a single catastrophic event. Property and casualty insurance companies experience large losses arising from man-made or natural catastrophes that can result in significant underwriting losses. Catastrophes can cause losses in a variety of property and casualty lines and may have continuing effects which could delay or hamper efforts to timely and accurately assess the full extent of the damage they cause. The incidence and severity of catastrophes are inherently unpredictable.

The Exchange's catastrophic loss risk is limited to the annual aggregate for each coverage type; any losses over and above these amounts are borne by excess insurers, contracted by AMSCIS.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

The loss limits by coverage type are as follows:

The Exchange purchases reinsurance for property claims which increases the maximum policy year amount in the event of a series of claims, but does not increase the maximum amount on any one loss. No reinsurance was purchased in 2023. Of the amount reinsured in 2022, the Exchange ceded 77% to third party reinsurers.

The Exchange does not purchase reinsurance for liability or auto physical damage claims

There has been no change to catastrophic loss risk from the prior year.

(ii) Concentration of underwriting risks

The Exchange is exposed to concentration of underwriting risk through the geographical proximity and comparable operations of its subscribers, primarily municipalities in the province of Alberta. The concentration of subscribers by geographic area and business operations exposes the Exchange to political, economic, regulatory, and environmental challenges affecting their businesses.

The Exchange’s exposure to concentration of underwriting risk is mitigated by a portfolio across three business lines (liability, property and auto physical damage). The table below provides a breakdown of net premiums by coverage type:

No reinsurance premiums were paid in 2023. Net premiums for 2022 include net reinsurance premiums of $337 ($1,300 gross reinsurance premiums, net of $963 ceded to reinsurers).

(iii) Sensitivity analysis

The risks associated with insurance contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The Exchange uses several statistical and actuarial techniques based on past claims development experience. This includes indications such as average claims cost, ultimate claims numbers and expected loss ratios.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

The Exchange considers that the insurance contract liabilities recognized in the statement of financial position is adequate. However, actual experience may differ from the expected outcome.

For the year ended December 31, 2023, changes in actuarial assumptions had no material effect on the insurance contract liabilities from the prior year end, as restated

Some results of sensitivity testing by claim year are set out below, showing the impact of a change in assumptions on total comprehensive income and subscribers’ surplus. For each sensitivity analysis, the impact of a change in a single factor is shown, with other assumptions unchanged. The Exchange's method used in preparing this sensitivity analysis has not changed significantly from the prior year.

Effect on total comprehensive income and subscribers' surplus

(c) Market risk:

Market risk is the risk of adverse financial impact as a consequence of market movements such as currency exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of the assets held and the value of liabilities.

Market risk is the risk that changes in market prices – e.g. foreign exchange rates, interest rates and equity prices – will affect the fulfilment cash flows of insurance and reinsurance contracts as well as the fair value or future cash flows of financial instruments. The objective of market risk management is to control market risk exposures within acceptable parameters while optimizing the return on risk.

Market risk principally arises from the Exchange’s equity investments and interest-bearing financial assets, but these exposures are largely offset by similar exposures arising from insurance and reinsurance contracts. The nature of the Exchange’s business and the Exchange's asset management processes means that it is exposed to market risk on net assets representing subscriber's surplus.

The Exchange has established policies and procedures in order to manage market risk.

(i) Currency risk:

The Exchange has no significant exposure to currency risk, as all insurance contracts issued are denominated in the Exchange's functional currency (Canadian dollars).

(ii) Interest rate risk:

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

Fluctuations in interest rates have a direct impact on the market valuation of the Exchange’s fixed income securities portfolio values. Historical data and current information are used to profile the ultimate claim settlement patterns by class of insurance, which is then used in a broad sense to develop an investment policy and strategy. Generally the investment income will move with interest rates over the long-term. Short-term interest rate fluctuations will generally create unrealized gains or losses. Generally, the Exchange’s investment income will be reduced during sustained periods of lower interest rates as higher yielding fixed income securities are called, mature, or are sold and the proceeds are reinvested at lower rates, and will likely result in unrealized gains in the value of fixed income securities the Exchange continues to hold, as well as realized gains to the extent the relevant securities are sold. During periods of rising interest rates, the market value of the Exchange’s existing fixed income securities will generally decrease and unrealized gains on fixed income securities will likely be reduced or result in unrealized losses.

Sensitivity analysis

Computations of the prospective effects of hypothetical interest rate changes are based on numerous assumptions, including the maintenance of the existing level and composition of fixed income investment assets at the indicated date, and are not indicative of future results. The analysis in this section is based on the following assumptions: 1) the investments in the Exchange’s portfolio are not impaired; 2) interest rates and equity prices move independently; 3) shifts in the yield curve are parallel; and, 4) credit and liquidity risks have not been considered. The Exchange's method for assessing sensitivity to interest rate fluctuations has not changed significantly from the prior year.

As at December 31, 2023, management estimates that an immediate hypothetical 100 basis point, or 1%, parallel increase in interest rates would decrease the market value of the fixed income investments (excluding cash) by $916 (December 31, 2022 - $1,032), representing 2.01% (2022 - 2.08%) of the $45,637 (December 31, 2022 - $49,517) fair value fixed income investments portfolio. Conversely, a 100 basis point decrease in interest rates would increase the market value of the fixed income investments by the same amount. If it was necessary to complete an unexpected immediate liquidation of assets to meet policy obligations, interest rate fluctuations could result in realized gains or losses greater than the change in reserve values.

(iii) Equity price risk:

The Exchange is exposed to equity price risk, which arises from equity securities held within pooled funds. The equity securities are listed on either the S&P/TSX Composite Index or the MSCI World Net Index. Fluctuations in these indices have a direct impact on the market valuation of the Exchange's equity securities. The Exchange monitors the proportion of equity securities in its investment portfolio and is advised by external investment managers to ensure that the investment portfolio remains stable.

Equity price risk is further mitigated through regulatory oversight by the Alberta Superintendent of Insurance, including prescribed investment limits requiring the Exchange to hold diversified portfolios of assets and restrict concentrations to geographies and industries.

Sensitivity analysis

As at December 31, 2023, management estimates that an immediate hypothetical 200 basis point, or 2%, parallel increase in the S&P/TSX Composite Index and the MSCI World

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

Net Index would increase the market value of the equity investments by $140 (December 31, 2022 - $134).

The Exchange's method for assessing sensitivity to equity price fluctuations has not changed significantly from the prior year.

(d) Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. The key areas of exposure to credit risk for the Exchange are in relation to its reinsurance program, its investment portfolio, and to a lesser extent amounts due from policyholders.

There is minimal concentration of credit risk regarding reinsurance, since seven reinsurers are used and risk is further mitigated by the financial strength of these reinsurers, which is evaluated on an annual basis. The actuarial estimate of the gross carrying value of unpaid claims and adjustment expenses recoverable from the reinsurer subject to credit exposure is $1,854 as at December 31, 2023 (2022 - $2,250) comprising total undiscounted recoverable case reserves.

The Exchange's credit risk management strategy is to invest primarily in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to any one issuer. The Exchange attempts to limit credit exposure by imposing portfolio limits on individual corporate issuers as well as limits based on credit quality.

The following table shows aggregated credit risk exposure for assets with external credit ratings.

31, 2023

at December 31, 2022

As at December 31, 2023 and 2022, the carrying values of investments and accounts receivable are neither past due nor impaired. No amounts related to expected credit losses have been recorded.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

(e) Liquidity risk

Liquidity risk is the risk that the Exchange cannot meet its obligations as they become due. Liquidity risk arises from the general business activities and in the course of managing the assets and liabilities of the Exchange. The liquidity requirements of the Exchange’s business are met primarily by cash generated from operations, asset maturities and income and other returns received on investments. Cash provided from these sources is used for claim payments and operating expenses. To meet these cash requirements, the Exchange has policies to limit and monitor its exposure to individual issuers. The Exchange also holds a portion of invested assets in liquid marketable investments. All current investment holdings of the Exchange are immediately redeemable.

At December 31, 2023, the Exchange has $6,539 (December 31, 2022 - $8,679) of cash and cash equivalents which includes $5,401 (December 31, 2022 - $9,147) of short-term investments. The cash equivalents are included in investments as they are managed as a component of the Exchange’s investment portfolio, and consist of treasury bills with an original maturity date of one year or less.

The following table shows details of the expected maturity profile of the Exchange’s obligations with respect to its financial liabilities and estimated cash flows of insurance contract liabilities. The table includes both interest and principal cash flows.

at December 31, 2023

at December 31, 2022

The following table details the Exchange’s expected maturity for its assets. The tables below have been drawn up based on the contractual maturities of the assets including interest that will be earned on those assets except where the Exchange anticipates that the cash flow will occur in a different period.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

The Exchange expects to meet its obligations from operating cash flows and proceeds of maturing financial assets.

(f)

Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Exchange’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks, such as the risks of mis-selling of products, modelling errors, and non-compliance with legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Exchange’s operations.

The Exchange’s objective in managing operational risk is to balance the avoidance of financial losses and damage to the Exchanges’s reputation with overall cost-effectiveness and innovation. In all cases, the Exchange's policy requires compliance with all applicable legal and regulatory requirements.

The Exchange's management is responsible for the development and implementation of controls to address operational risk, subject to oversight by the advisory board. This responsibility is supported by the development of overall policies for the management of operational risk in the following areas:

• requirements for appropriate segregation of duties, including the independent authorization of transactions;

• requirements for the reconciliation and monitoring of transactions;

• compliance with regulatory and other legal requirements;

• documentation of controls and procedures;

• requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;

• requirements for the reporting of operational losses and proposed remedial action;–development of contingency plans;– training and professional development;

• ethical and business standards;

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

• information technology, data security and cyber risks; and

• risk mitigation, including insurance where this is cost-effective.

Compliance with the Exchange's policies is monitored through periodic reviews undertaken by administration. The results of internal reviews are discussed with the principal attorney, with summaries submitted to the Exchange’s audit and finance committee and the advisory board.

(g) CAPITAL MANAGEMENT

(i)

Regulatory Capital

The Exchange is regulated by the Alberta Superintendent of Insurance and the Alberta Insurance Act. Accordingly, in addition to subscribers’ surplus, the Exchange is required by the Alberta Superintendent of Insurance to maintain an excess of cash and securities over the Reserve and Guarantee Fund.

The Reserve and Guarantee Fund has three components: a reserve fund which consists of 50% of premiums collected in the current fiscal year; a guarantee fund which consists of the Exchange’s total liabilities; and a $50,000 statutory margin. If the Exchange experiences a shortfall of cash and securities over the Reserve and Guarantee Fund, the Alberta Superintendent of Insurance requires the Exchange to produce a plan to eliminate the shortfall. As at December 31, 2023, the Exchange has an excess of cash and securities over the Reserve and Guarantee Fund of $20,355 (December 31, 2022$24,605).

(ii) Capital allocation

Capital is defined as subscribers’ surplus. Subscribers’ surplus represents contributions made by subscribers and the excess of revenues over expenses, and may be used to cover potential future catastrophic claims, reduce future premiums, or be paid out to subscribers.

The Exchange has developed a capital strategy and monitors its capital management status. The Exchange's objectives when managing capital consist of maintaining sufficient capital to support claims liabilities and ensure the confidence of policyholders, support competitive pricing strategies and meet regulatory capital requirements as defined by the Alberta Superintendent of Insurance and the Alberta Insurance Act.

The Alberta Superintendent of Insurance has established a Minimum Capital Test guideline ("MCT"), which sets out 100% as the minimum and 210% as the supervisory target for the Exchange.  The Exchange's internal target ratio which was approved by the Board of Directors was 240% for 2023 (2022 - 240%). As at December 31, 2023, the Exchange's MCT ratio was 382% (December 31, 2022 - 461%). As at December 31, 2023, the Exchange was in compliance with the Alberta Superintendent of Insurance regulations.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

7. Investments:

The fair values of investments classified as FVTPL are summarized as follows:

Treasury bills are managed as a component of the Exchange's investment portfolio.

The average net annual rate of return for the year ended December 31, 2023 based on the fair value of the Exchange's investment portfolio is 6.09% (2022 - negative 2.93%).

Fair value hierarchy

The Exchange has segregated all financial assets that are measured at fair value into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. The table below analyzes financial instruments carried at fair value by valuation method.

The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

There were no transfers of assets between levels in the current or prior year.

8. Insurance and reinsurance contracts:

(a) Movements in insurance and reinsurance contract balances

The following reconciliations show how the net carrying amounts of insurance and reinsurance contracts changed during the year as a result of cash flows and amounts recognized in comprehensive income.

For an explanation of how contracts were measured under the retrospective approach to IFRS 17, see Note 4.

by

December 31, 2023

and

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

December 31, 2022

Reinsurance costs - analysis by remaining coverage and incurred claims

December 31, 2023

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

December 31, 2022

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with

(b) Claims development

The following table illustrates how estimates of cumulative claims for the Exchange have developed over time on a gross and net of reinsurance basis. Each table shows how the Exchange's estimates of total claims for each accident year have developed over time and reconciles the cumulative claims to the amount included in the statement of financial position.

Gross of reinsurance

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

(c) Significant judgements and estimates

(i) Fulfilment cash flows

Fulfilment cash flows comprise:

• estimates of future cash flows;

• an adjustment to reflect the time value of money and the financial risks related to future cash flows, to the extent that the financial risks are not included in the estimates of future cash flows; and

• a risk adjustment for non-financial risk.

The Exchange’s objective in estimating future cash flows is to determine the expected value of a range of scenarios that reflects the full range of possible outcomes. The cash flows from each scenario are discounted and weighted by the estimated probability of that outcome to derive an expected present value. If there are significant interdependencies between cash flows that vary based on changes in market variables and other cash flows, then the Exchange uses modelling techniques to estimate the expected present value, which involves projecting future cash flows under a large number of possible economic scenarios for market variables such as interest rates and equity returns.

A. Estimates of future cash flows

In estimating future cash flows, the Exchange incorporates, in an unbiased way, all reasonable and supportable information that is available without undue cost or effort at the reporting date. This information includes both internal and external historical data about claims and other experience, updated to reflect current expectations of future events.

The estimates of future cash flows reflect the Exchange’s view of current conditions at the reporting date, as long as the estimates of any relevant market variables are consistent with observable market prices. When estimating future cash flows, the Exchange takes into account current expectations of future events that might affect those cash flows. However, expectations of future changes in legislation that would change or discharge a present obligation or create new obligations under existing contracts are not taken into account until the change in legislation is substantively enacted. The Exchange derives cost inflation assumptions from the difference between the yields on nominal and inflation-linked government bonds.

Cash flows within the boundary of a contract relate directly to the fulfilment of the contract, including those for which the Exchange has discretion over the amount or timing. These include payments to (or on behalf of) policyholders, insurance acquisition cash flows and other costs that are incurred in fulfilling contracts.

Insurance acquisition cash flows arise from the activities of selling, underwriting and starting a group of contracts that are directly attributable to the portfolio of contracts to which the group belongs. Other costs that are incurred in fulfilling the contracts include claims handling, policy maintenance and administration costs.

Insurance acquisition cash flows and other costs that are incurred in fulfilling contracts comprise both direct costs and an allocation of fixed and variable overheads.

Cash flows are attributed to acquisition activities, other fulfilment activities, and other activities using activity-based costing techniques. Cash flows attributable to acquisition and other fulfilment activities are allocated to groups of contracts using methods that are systematic and rational and are consistently applied to all costs that have similar

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

characteristics. The Exchange generally allocates cash flows to groups of contracts based on the total premiums for each group. Other costs are recognized in profit or loss as they are incurred.

Contract boundaries

The assessment of the contract boundary, which defines the future cash flows included in the measurement of a contract, requires judgement and consideration of the Exchange’s substantive rights and obligations under the contract.

Insurance contracts

The Exchange determines that the cash flows related to future renewals of these contracts are outside the contract boundary. This is because the premium charged for each year reflects the Exchange’s expectation of its exposure to risk for that year and, on renewal, the Exchange can reprice the premium to reflect the reassessed risks for the next year based on claims experience and expectations for the respective portfolio. Any renewal of the contract is treated as a new contract and is recognized, separately from the initial contract, when the recognition criteria are met.

Reinsurance contracts

Each of the Exchange’s excess of loss reinsurance contracts has an annual term and covers claims from underlying contracts incurred within the year (i.e. loss-occurring). Cash flows within the contract boundary are those arising from underlying claims incurred during the year.

The Exchange estimates the ultimate cost of settling claims incurred but unpaid at the reporting date and the value of salvage and other expected recoveries by reviewing individual claims reported and making allowance for claims incurred but not yet reported. The ultimate cost of settling claims is estimated using a range of loss reserving techniques which assume that the Exchange’s own claims experience is indicative of future claims development patterns and therefore ultimate claims cost. The ultimate cost of settling claims is estimated separately for each line of business, except for large claims, which are assessed separately from other claims.

The assumptions used, including loss ratios and future claims inflation, are implicitly derived from the historical claims development data on which the projections are based, although judgement is applied to assess the extent to which past trends might not apply in the future and future trends are expected to emerge.

B. Discount rates

All cash flows are discounted using risk-free yield curves adjusted to reflect the characteristics of the cash flows and the liquidity of the insurance contracts.

The Canadian Institute of Actuaries retained the services of Fiera Capital Corporation ("Fiera") to produce, on a monthly basis, the Fiera Capital’s CIA IFRS 17 Market Curves and Reference Curves ("FC Curves") for use by insurance companies in Canada. Some of the key inputs used in the establishment of these reference curves are the observable market rates on the Canadian bond market. This includes a Government of Canada (i.e. “risk-free”) market curve, a provincial bond market curve and a corporate bond market curve.

The FC curves are used by the Exchange to establish the liquid and illiquid discounting curves to be applied to cash flows. The Exchange will update the FC curves at each valuation date. If the FC curves are unavailable at reporting time, the Exchange will construct its yield curve following the methodology employed by Fiera.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

C. Risk adjustments for non-financial risk

Risk adjustments for non-financial risk are determined to reflect the compensation that the Exchange would require for bearing non-financial risk and are allocated to groups of contracts based on an analysis of the risk profiles of the groups. Risk adjustments for non-financial risk reflect the diversification benefits from contracts issued by the Exchange, in a way that is consistent with the compensation that it would require and that reflects its degree of risk aversion, and the effects of the diversification benefits are determined using a correlation matrix technique. The risk adjustments for non-financial risk are determined using a confidence level technique.

To determine the risk adjustments for non-financial risk for reinsurance contracts, the Exchange applies the technique both gross and net of reinsurance and derives the amount of risk being transferred to the reinsurer as the difference between the two results.

Applying a confidence level technique, the Exchange estimates the probability distribution of the expected present value of the future cash flows from insurance contracts at each reporting date and calculates the risk adjustment for non-financial risk as the excess of the value at risk at the 75th percentile (the target confidence level) over the expected present value of the future cash flows.

(ii) Fair value of insurance contracts

The Exchange has measured the fair value of insurance contracts when it applied the full retrospective approach on transition to IFRS 17 (see Note 12(a)(viii). The Exchange has measured the fair value of insurance contracts as the sum of (a) the present value of the net cash flows expected to be generated by the contracts, determined using a discounted cash flow technique; and (b) an additional margin, determined using a confidence level technique.

The cash flows considered in the fair value measurement are consistent with those that were within the contract boundary. Therefore, the cash flows related to expected future renewals of insurance contracts are not considered in determining the fair value of those contracts if they are outside the contract boundary.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

9. Net Financial Result

The following table analyzes the Exchanges net financial result in comprehensive income.

Net finance income (expense) from insurance contracts

Effect of measuring changes in estimates at current rates as adjusted from rates used on initial recognition $ (119) $

Effect of unwinding of discounts

Effect of changes in yield curves (166)

finance income (expense) from investment

10. Expenses

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

11. Related party transactions:

The affairs of the Exchange are governed by the Advisory Board. The majority of the board members are also directors of ABmunis, and all the subscribers to the Exchange are also members of ABmunis. As such, all of the entities that operate under the auspices of ABmunis are considered related parties to the Exchange. This includes AMSCIS, who acts as agent for the Exchange, and Alberta Municipal Services Corporation (“AMSC”), also a wholly owned subsidiary of ABmunis, who is the administrator of a high interest savings account in which the Exchange invests.

The Exchange does not employ any individuals directly. Agency and administrative services are provided to the Exchange by ABmunis, for which fees are charged. Of the total agency and administration fees, $2,232 relate to the salaries and benefits of employees (2022 - $1,956).

The following balances are outstanding with related parties as at December 31: (in thousands)

The following transactions with the related parties occurred during the year ended December 31:

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

12. Material accounting policies:

The accounting policies set out below have been applied consistently to all periods presented in these  financial statements, unless otherwise indicated (see also Note 4).

(a) Insurance and reinsurance contracts

(i) Classification:

Contracts under which the Exchange accepts significant insurance risk are classified as insurance contracts. Contracts held by the Exchange under which it transfers significant insurance risk related to underlying insurance contracts are classified as reinsurance contracts. Insurance and reinsurance contracts also expose the Exchange to financial risk. The Exchange does not accept insurance risk from other insurers.

(ii) Aggregation and recognition:

Insurance contracts

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

Insurance contracts are aggregated into groups for measurement purposes. Groups of insurance contracts are determined by identifying portfolios of insurance contracts, each comprising contracts subject to similar risks and managed together, and dividing each portfolio into annual cohorts (i.e. by year of issue) and each annual cohort into three groups based on the profitability of contracts:

• any contracts that are onerous on initial recognition;

• any contracts that, on initial recognition, have no significant possibility of becoming onerous subsequently; and

• any remaining contracts in the annual cohort.

An insurance contract issued by the Exchange is recognized from the earliest of:

• the beginning of its coverage period (i.e. the period during which the Exchange provides services in respect of any premiums within the boundary of the contract);

• when the first payment from the policyholder becomes due or, if there is no contractual due date, when it is received from the policyholder; and

• when facts and circumstances indicate that the contract is onerous.

When the contract is recognized, it is added to an existing group of contracts or, if the contract does not qualify for inclusion in an existing group, it forms a new group to which future contracts are added. Groups of contracts are established on initial recognition and their composition is not revised once all contracts have been added to the group.

Reinsurance contracts

Groups of reinsurance contracts are established such that each group comprises a single contract.

A group of reinsurance contracts is recognized at the beginning of the coverage period of the group of reinsurance contracts. However, if the Exchange recognizes an onerous group of underlying insurance contracts on an earlier date and the related reinsurance contract was entered into before that earlier date, then the group of reinsurance contracts is recognized on that earlier date (see ‘Reinsurance of onerous underlying insurance contracts’ under (v)).

(iii) Insurance acquisition cash flows:

Insurance acquisition cash flows are expensed as incurred.

(iv) Contract boundaries:

The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the group, determined as follows.

Insurance contracts

Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Exchange can compel the policyholder to pay premiums or has a substantive obligation to provide services (including insurance coverage and any investment services).

A substantive obligation to provide services ends when:

• the Exchange has the practical ability to reassess the risks of the particular policyholder and can set a price or level of benefits that fully reflects those reassessed risks; or

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

• the Exchange has the practical ability to reassess the risks of the portfolio that contains the contract and can set a price or level of benefits that fully reflects the risks of that portfolio, and the pricing of the premiums up to the reassessment date does not take into account risks that relate to periods after the reassessment date.

The reassessment of risks considers only risks transferred from policyholders to the Exchange, which may include both insurance and financial risks, but exclude lapse and expense risks.

Reinsurance contracts

Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Exchange is compelled to pay amounts to the reinsurer or has a substantive right to receive services from the reinsurer.

A substantive right to receive services from the reinsurer ends when the reinsurer:

• has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those reassessed risks; or

• has a substantive right to terminate the coverage.

The contract boundary is reassessed at each reporting date to include the effect of changes in circumstances on the Exchange’s substantive rights and obligations and, therefore, may change over time.

(v) Measurement:

Because the coverage period of all insurance and reinsurance contracts is one year or less at inception, the Exchange uses the PAA to simplify the measurement of groups of contracts.

Insurance contracts

On initial recognition of each group of contracts, the carrying amount of the liability for remaining coverage is measured at the premiums received on initial recognition minus any insurance acquisition cash flows allocated to the group at that date, and adjusted for any amount arising from the derecognition of any assets or liabilities previously recognized for cash flows related to the group (including assets for insurance acquisition cash flows under (iii)).

The Exchange has chosen to expense insurance acquisition cash flows when they are incurred. Subsequently, the carrying amount of the liability for remaining coverage is increased by any premiums received and the amortization of insurance acquisition cash flows recognized as expenses, and decreased by the amount recognized as insurance revenue for services provided (see (vii)). On initial recognition of each group of contracts, the Exchange expects that the time between providing each part of the services and the related premium due date is no more than a year. Accordingly, the Exchange has chosen not to adjust the liability for remaining coverage to reflect the time value of money and the effect of financial risk.

If at any time during the coverage period, facts and circumstances indicate that a group of contracts is onerous, then the Exchange recognizes a loss in profit or loss. The fulfilment cash flows are discounted (at current rates) if the liability for incurred claims is also discounted (see below).

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

The Exchange recognizes the liability for incurred claims of a group of insurance contracts at the amount of the fulfilment cash flows relating to incurred claims. The future cash flows are discounted (at current rates) unless they are expected to be paid in one year or less from the date the claims are incurred.

Reinsurance contracts

The Exchange applies the same accounting policies to measure a group of reinsurance contracts, adapted where necessary to reflect features that differ from those of insurance contracts.

(vi) Derecognition and contract modification:

The Exchange derecognizes a contract when it is extinguished - i.e. when the specified obligations in the contract expire or are discharged or cancelled. The Exchange also derecognizes a contract if its terms are modified in a way that would have changed the accounting for the contract significantly had the new terms always existed, in which case a new contract based on the modified terms is recognized. If a contract modification does not result in derecognition, then the Exchange treats the changes in cash flows caused by the modification as changes in estimates of fulfilment cash flows.

(vii) Presentation:

Portfolios of insurance contracts that are assets and those that are liabilities, and portfolios of reinsurance contracts that are assets and those that are liabilities, are presented separately in the statement of financial position. Any assets or liabilities recognized for cash flows arising before the recognition of the related group of contracts are included in the carrying amount of the related portfolios of contracts.

The Exchange disaggregates amounts recognized in the statement of comprehensive loss into (a) an insurance service result, comprising insurance revenue and insurance service expenses; and (b) insurance finance income or expenses.

Income and expenses from reinsurance contracts are presented separately from income and expenses from insurance contracts. Income and expenses from reinsurance contracts, other than insurance finance income or expenses, are presented on a net basis as ‘net expenses from reinsurance contracts’ in the insurance service result.

The Exchange does not disaggregate changes in the risk adjustment for non-financial risk between the insurance service result and insurance finance income or expenses. All changes in the risk adjustment for non-financial risk are included in the insurance service result.

Insurance revenue

Insurance revenue for each period is the amount of expected premium receipts for providing services in the period.

Insurance service expenses

Insurance service expenses arising from insurance contracts are recognized in profit or loss generally as they are incurred and include the following items:

• Incurred claims and other insurance service expenses

• Amortization of insurance acquisition cash flows

• Losses on onerous contracts and reversals of such losses

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

• Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and changes therein.

Net expenses from reinsurance contracts

Net expenses from reinsurance contracts comprise an allocation of reinsurance premiums paid less amounts recovered from reinsurers.

The Exchange recognizes reinsurance premiums paid in profit or loss as it receives services under groups of reinsurance contracts.

Insurance finance income and expenses

Insurance finance income and expenses comprise changes in the carrying amounts of groups of insurance and reinsurance contracts arising from the effects of the time value of money, financial risk and changes therein. They include changes in the measurement of groups of contracts caused by changes in the value of underlying items (excluding additions and withdrawals). Insurance finance income or expenses are included in profit or loss.

(viii) Transition:

At January 1, 2022, the Exchange applied the full retrospective approach to identify and measure groups of contracts on transition to IFRS 17.

(b) Financial assets and financial liabilities:

(i) Recognition and initial measurement

The Exchange recognizes deposits with financial institutions on the date on which they are originated. All other financial instruments are recognized on the trade date, which is the date on which the Exchange becomes a party to the contractual provisions of the instrument.

(ii) Classification and subsequent measurement

Financial assets:

On initial recognition, a financial asset is classified as measured at amortized cost or FVTPL. The Exchange does not classify financial assets as FVOCI as the Exchange's business model does not include the sale of financial assets. Financial assets are not reclassified subsequent to their initial recognition unless the Exchange changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortized cost as described above are measured at FVTPL. In addition, on initial recognition, the Exchange may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

Business model assessment

The Exchange assesses the objective of the business model in which a financial asset is held for each portfolio of financial assets because this best reflects the way that the business is managed and information is provided to management. The information considered includes:

• the stated policies and objectives for the portfolio and the operation of those policies in practice, including whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of assets;

• how the performance of the portfolio is evaluated and reported to the Exchange’s management;

• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

• how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); and

• the frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Exchange’s stated objective for managing the financial assets is achieved and how cash flows are realized.

The Exchange has classified cash and accounts receivable as measured at amortized cost, as the Exchange's business model is to hold these financial assets to collect contractual cash flows, and the related cash flows arising comprise solely principal and interest payments.

The Exchange has classified its investments, which include debt and equity securities and treasury bills as FVTPL. These investments form part of a portfolio of financial assets which is managed and its performance is evaluated on a fair value basis, in accordance with the Exchange's documented risk management or investment strategy, and information about the portfolio is provided internally on that basis.

Investments are recorded at fair value with realized gains and losses on sale and changes in the fair value recorded in net investment income. Transaction costs, as well as custodian and investment manager fees are recognized in income as incurred, as part of general investment expenses.

The fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined by reference to quoted market prices. The fair value of other financial assets (i.e. those not traded on active liquid markets) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

Financial liabilities:

The Exchange classifies all financial liabilities, comprising accounts payable and accrued liabilities as measured under amortized cost. Such financial liabilities are recognized initially at fair value along with any directly attributable transaction costs. The fair value of

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

these financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method.

Interest on financial instruments:

Interest income and expenses are recognized in profit or loss using the effective interest method. The effective interest rate is calculated on initial recognition of a financial instrument is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortized cost of the financial liability.

(iii) Impairment of financial assets:

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively impacted.

For certain categories of financial assets, such as accounts receivable, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets and the loss is recognized in comprehensive income.

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 through comprehensive income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost that would have been recognized had the initial impairment loss not been recognized.

(iv) Derecognition

The Exchange derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Exchange neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Exchange recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Exchange retains substantially all the risks and rewards of ownership of a transferred financial asset, the Exchange continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

The Exchange derecognizes a financial liability when its contractual obligations are discharged, canceled or expire.

(v) Cash

Cash comprises cash balances on hand and cash managed within the investment portfolio.

(vi) Offsetting

ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

For the year ended December 31, 2023, with comparative information for 2022

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Exchange has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(c) Income taxes:

No provision for income taxes has been made in these financial statements as the Exchange is not subject to such income taxes.

Financial Statements of

APEX SUPPLEMENTARY PENSION PLAN

Year ended December 31, 2023

KPMG LLP

2200, 10175 – 101 Street

Edmonton, AB T5J 0H3

Canada

Telephone 780-429-7300

Fax 780-429-7379

INDEPENDENT AUDITOR’S REPORT

To the Governance Boards of APEX and Association of Alberta Municipalities

Opinion

We have audited the financial statements of APEX Supplementary Pension Plan (the “Entity”), which comprise:

 the statement of financial position as at December 31, 2023

 the statement of changes in net assets available for benefits for the year then ended

 the statement of changes in pension obligations for the year then ended

 the statement of changes in accumulated surplus for the year then ended

 and notes to the financial statements, including a summary of material accounting policies (Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements, present fairly, in all material respects, the financial position of the Entity as at December 31, 2023, and its changes in net assets available for benefits, its changes in pension obligations and its changes in accumulated surplus for the year then ended in accordance with Canadian accounting standards for pension plans.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of ours auditor’s report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance with these requirements.

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

Other Information

Management is responsible for the other information. Other information comprises the information, other than the financial statements and the auditor’s report thereon, included in the 2023 Annual Report.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information, other than the financial statements and the auditor’s report thereon, included in the 2023 Annual Report as at the date of this auditor’s report.

If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report.

We have nothing to report in this regard.

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

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

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian general accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individual or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.

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

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Chartered Professional Accountants

Edmonton, Canada

June 3, 2024

APEX SUPPLEMENTARY PENSION PLAN

Statement of Financial Position

As at December 31, 2023, with comparative information for 2022

See accompanying notes to the financial statements.

On behalf of the Governance Board:

APEX SUPPLEMENTARY PENSION PLAN

Statement of Changes in Net Assets Available for Benefits Year ended December 31, 2023, with comparative information for 2022

See accompanying notes to the financial statements.

APEX SUPPLEMENTARY PENSION PLAN

Statement of Changes in Pension Obligations

Year ended December 31, 2023, with comparative information for 2022

See accompanying notes to the financial statements.

APEX SUPPLEMENTARY PENSION PLAN

Statement of Changes in Accumulated Surplus Year ended December 31, 2023, with comparative information for 2022

Accumulated surplus, beginning of year $ 3,323,814 $ 2,063,935 Increase (decrease) in net assets available for benefits 11,914,309 (8,146,319) (Increase) decrease in pension obligations (4,931,710) 9,406,198

Accumulated surplus, end of year $ 10,306,413 $ 3,323,814

See accompanying notes to the financial statements.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

1. Description of the Plan:

The APEX Supplementary Pension Plan ("the Plan") was established on January 1, 2003 to enhance and supplement the Local Authorities Pension Plan ("LAPP") for eligible staff of participating municipalities in Alberta. A complete description of the Plan can be found in the Plan documents.

The Plan is a voluntary, contributory, defined benefit pension plan.

The Plan is a registered plan under the Income Tax Act (Canada) (''ITA'') and the Employment Pension Plans of Alberta Act ("the Act").

Pursuant to Section 3(1) of the Act, the Plan is considered to be a public pension plan, and, as a result, the employers are exempt from making solvency deficiency payments.

The key features of the Plan are a full 2% benefit accrual rate on all pensionable earnings that correspond to the participating member's best five years' consecutive earnings and a normal form pension that pays two-thirds to the surviving pension partner on the participating member's death.

In the absence of a pension partner, pension benefits payable during the first ten years of retirement shall be paid to the participating member's beneficiary in the event of death of the participating member during that period.

The Plan is for contributory service on and following January 1, 2003. The Plan contributions are cost shared by both the employer and employee and are based on pensionable earnings up to $175,333 (2022 - $171,000) based on the current Canada Revenue Agency maximum annual pension accrual of $3,507 (2022 - $3,420).

2. Basis of preparation:

(a) Basis of presentation:

These financial statements, prepared on the going concern basis in accordance with Canadian accounting standards for pension plans of the CPA Canada Handbook, present the aggregate financial position of the Plan as a separate financial reporting entity independent of the Plan sponsor, Association of Alberta Municipalities ("ABmunis") and Plan members. They are prepared to assist Plan members and others in reviewing the activities of the Plan. They do not purport to indicate whether the assets of the Plan together with investment earnings thereon, plus future contributions, will be sufficient to finance all benefits to be provided under the Plan.

In selecting or changing accounting policies that do not relate to its investment portfolio or pension obligations, the Plan has a choice to comply on a consistent basis with either International Financial Reporting Standards in Part I of the CPA Canada Handbook, or Canadian accounting standards for private enterprises ("ASPE") in Part II of the CPA Canada Handbook, to the extent that those standards do not conflict with the requirements under Section 4600. The Plan has chosen to comply on a consistent basis with ASPE in Part II of the CPA Canada Handbook.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

2. Basis of presentation (continued):

(b) Basis of measurement:

The financial statements have been prepared on a historical cost basis except for investments, which are recorded at fair value through the statement of changes in net assets available for benefits.

(c) Functional presentation and currency:

These financial statements are presented in Canadian dollars, which is the Plan's functional currency.

(d) Use of estimates and judgments:

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the statement of financial position and the reported amounts of changes in net assets available for benefits during the year. Actual results may differ from those estimates.

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

While best estimates have been used in the valuation of the Plan's pension obligations, management considers that it is possible, based on existing knowledge, that changes in future conditions could require a material change in the recognized amounts.

Differences between actual results and expectations in the Plan's pension obligations are disclosed as changes in assumptions and net experience gains or losses in the statement of changes in pension obligations in the year when actual results are known.

3. Significant accounting policies:

(a) Cash:

Cash is comprised of cash on hand.

(b) Foreign currency:

Transactions in foreign currencies are translated into Canadian dollars at the exchange rate on the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into Canadian dollars at the exchange rate at that date.

(c) Investment transactions, income recognition and transaction costs:

(i) Investment transactions:

Investment transactions are accounted for on a trade date basis.

(ii) Income recognition:

Investment income is recorded on an accrual basis and includes interest income and pooled investment income.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

3. Significant accounting policies (continued):

(c) Investment transactions, income recognition and transaction costs (continued):

(ii) Income recognition (continued):

Interest:

Interest income is recognized in the statement of changes in net assets available for benefits when earned.

Pooled investment income:

Income earned within the pooled investment funds is comprised of interest, dividends, realized and unrealized gains and losses from Canadian and foreign sources and is recognized in the statement of changes in net assets available for benefits when earned.

(iii) Transaction costs:

Brokers' commissions and other transaction costs are recognized in the statement of changes in net assets available for benefits when incurred.

(d) Financial assets and financial liabilities:

(i) Financial assets:

The Plan recognizes financial assets on the trade date, at which the Plan becomes a party to the contractual provisions on the financial asset contract.

The Plan derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the carrying amount of the asset and consideration received is recognized in the statement of changes in net assets available for benefits as investment income or loss.

(ii) Financial liabilities:

All financial liabilities are recognized initially on the date that the Plan becomes a party to the contractual provisions of the instrument.

The Plan derecognizes a financial liability when its contractual obligations are discharged, canceled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Plan has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Financial liabilities are comprised of accounts payable and accrued liabilities. Such financial liabilities are recognized initially at fair value along with any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method.

(e) Fair value measurement:

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

3. Significant accounting policies (continued):

(e) Fair value measurement (continued):

In determining fair value, the Plan follows the guidance in IFRS 13, Fair Value Measurement ("IFRS 13"), in Part I of the CPA Canada Handbook as required by Section 4600. As allowed under IFRS 13, if an asset or a liability measured at fair value has a bid and an ask price, the price within the bid-ask spread that is the most representative of fair value in the circumstances shall be used to measure fair value. The Plan uses closing market price as a practical expedient for fair value measurement.

When available, the Plan measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.

If a market for a financial instrument is not active, then the Plan establishes fair value using valuation techniques. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analysis and option pricing models.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets. When the transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognized in the statement of changes in net assets available for benefits on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.

All changes in fair value are recognized in the statement of changes in net assets available for benefits in unrealized gains or unrealized losses.

Fair values of the pooled fund investments are determined at the unit values supplied by the pooled fund administrator, which represent the fund's proportionate share of underlying net assets at fair values determined using closing market prices.

(f) Income taxes:

The Plan is a registered pension plan as defined by the ITA and, accordingly, is not subject to income taxes.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

4. Investments:

The following table summarizes investments as at December 31:

Investments consist of pooled funds that are managed by third parties and administered by Sun Life Company. The fund name, manager and summary of each of the funds’ investment objectives and composition is as follows:

Long-term bond fund (TDAM Canadian Long Bond Index Segregated Fund)

Manager - TD Asset Management Inc.

The fund's investment objective is to provide performance similar to the performance of the FTSE Canada Long Bond Index. The fund intends to achieve its objective by investing primarily in Canadian issued bonds and debentures that are selected and weighted mathematically to approximate the overall risk and return characteristics of the FTSE Canada Long Bond Index. A large portion of the fund is invested in government and corporate bonds of maturity of more than ten years. Investments have a minimum "A" credit rating and are liquid allowing restructuring as expectations and relative values change.

Global equity low volatility fund (TDAM Low Volatility Global Equity Segregated Fund)

Manager - TD Asset Management Inc.

The performance objective of the fund is to provide a better risk-adjusted return than the MSCI World ex-Canada Total Return Index. The fund invests primarily in securities which are included in the index, subject to investment restrictions of the fund. The portfolio is broadly diversified and invests in a large number of securities but is not expected to include all securities in the index. In order to meet the fund’s objectives, the asset mix is built with significantly different characteristics. As a result, the tracking error relative to the index is expected to be relatively high even though the standard deviation of return is expected to be materially less than that of the index. The asset allocation of the underlying fund consists of approximately 46% of U.S. equities and 54% of international equities (2022 - 48% of U.S. equities and 52% of international equities).

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

4. Investments (continued):

Global equity fund (T. Rowe Price Global Growth Equity Segregated Fund)

Manager - T. Rowe Price.

The fund's investment objective is to provide a long-term growth of portfolio with a value bias that invests primarily in common equities of large-cap companies located throughout the world. The fund conforms to a long-term investment horizon. The fund's investment in a single security is limited to 10% of the fund's total value. The asset mix of the underlying fund consists of approximately 58% of North American equities, 37% of international equities, and 5% of cash and cash equivalents (2022 - 55% of North American equities, 45% of international equities, and 0% of cash and cash equivalents).

Global equity fund (Mawer Global Equity Segregated Fund)

Manager - Mawer Investment Management Ltd.

The fund's investment objective is to provide a well diversified portfolio with a value bias that invests primarily in equities of companies located in developed markets around the world. The fund conforms to a long-term investment horizon. The asset mix of the underlying fund consists of approximately 55% of North American equities, 43% of international equities and 3% of cash and cash equivalents (2022 - 57% of North American equities, 39% of international equities and 4% of cash and cash equivalents).

Diversified growth fund (Schroder Diversified Growth Segregated Fund)

Manager - Schroder Investment Management North America Inc.

The Schroder Diversified Growth Fund (Canada) provides long-term capital appreciation through a flexible asset allocation approach to produce a diversified portfolio, with an emphasis on reducing downside risk and earning above the risk free rate. The objective is to generate long-term real returns comparable to equities but with a lower volatility than equities alone. The fund combines asset classes with different strategies and styles to achieve strong diversification. This includes various traditional and non-traditional assets. The fund’s portfolio is actively managed throughout each economic cycle to balance opportunity and risk. The asset mix of the fund consists of approximately 41% of fixed income instruments, 36% of international and U.S. equities, and 23% of other investments such as derivatives and futures contracts (2022 - 51% of fixed income instruments, 26% of international and U.S. equities, 22% of other investments such as derivatives and futures contracts and 1% of cash and cash equivalents).

Emerging markets equity fund (Sun Life Schroder Emerging Markets Equity Segregated Fund)

Manager - SLGI Asset Management Inc.

The fund's investment objective is to provide capital appreciation by investing primarily in equity securities of companies with a connection to emerging markets. With a balanced approach to investing in emerging markets, the fund’s manager uses a mix of top-down analysis and bottom-up stock selection, looking to derive 50% of the added value from country allocation and 50% from stock selection. The core investment process does not target any particular style bias and aims to outperform in most market environments.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

4. Investments (continued):

Real estate property fund (BentallGreenOak Prime Canadian Property Segregated Fund)

Manager - BGO Capital (Canada) Inc.

The fund's investment objective is to provide a stable income return with an emphasis on capital preservation and long-term growth that meets or exceeds the Consumer Price Index. The fund invests in a diversified portfolio of properties that are primarily income-producing; office, industrial, retail distribution and warehouse and multi-family residential properties with strong underlying cash flows located in major Canadian markets. Minimum investment threshold for a single real estate property is $5 million. The fund's investment in a single real estate property is limited to 10% of the fund's total value. Cash and short term investments are normally less than 10% of the market value of the total portfolio.

Global equity small cap (Invesco Global Small Cap Equity Segregated Fund)

Manager - Invesco Ltd.

The fund seeks to achieve capital growth over the long term by investing primarily in small capitalization companies anywhere in the world. Asset allocation strategy is based on a medium to long-term economic and bottom-up investment approach to security selection in each region. The focus is on small capitalization companies with high or improving returns at an attractive valuation in both developed and emerging markets. The fund targets to invests at least 80% of its non-cash assets in small capitalization companies. The geographical allocation of the fund consists of approximately 48% of North American equities, 51% of international equities and 1% cash and cash equivalents (2022 - 46% of North American equities, 53% of international equities and 1% cash and cash equivalents).

Real estate fund (BentallGreenOak Canadian Real Estate Plus Segregated Fund)

Manager - BGO Capital (Canada) Inc.

The fund's investment objective is to provide strong stable income returns, combined with value appreciation potential through investments in a diversified mix of office, industrial, retail, multifamily residential, land and other income producing properties located in Canada. The fund's investment strategy is to invest up to 80% of its assets (targeted minimum 70%) in the Bentall Kennedy Prime Canadian Property Pool Limited Partnership. In addition, the fund invests 20%30% of its assets in cash and/or publicly-traded Canadian real estate investment trusts (REITs), through the use of (an) exchange traded fund(s). This ensures greater liquidity available for investors.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

Pension obligations:

An actuarial valuation of the Plan was carried out as at December 31, 2021 by the Plan's actuarial consultants, AON, and was extrapolated to December 31, 2023. The pension obligations were determined using the projected accrued benefit cost method prorated on service. Actuarial valuations are required every three years, at a minimum. The next valuation is due for the year ended December 31, 2024.

The assumptions used in the extrapolation were developed as the best estimate of expected future market conditions and other future events. After consultation with the Plan's actuary, the Governance Board adopted this best estimate.

The major assumptions used in the extrapolation are as follows:

Mortality

Deferred pension take-up

Settlement assumptions for commuted value transfers

Retirement*

Termination of employment

ITA maximum pension:

90% of CPM2014 Public with generational improvements using scale MI-2017 (sexdistinct rates)

for ages <55

CV discount rate of 4.75% per year for post-2019 service and 3.55% per year discount for pre-2020 service

Mortality: 90% of CPM2014 Combined with generational improvement using scale MI-2017 (sex-distinct rates)

Age and service-based scale

Deferred vested members: capped at 100% at age 65

Age and gender-based scale

90% of CPM2014 Public with generational improvements using scale MI-2017 (sexdistinct rates)

CV discount rate of 4.75% per year for post-2019 service and 3.55% per year discount for pre-2020 service

Mortality: 90% of CPM2014 Combined with generational improvement using scale MI-2017 (sex-distinct rates)

Age and service-based scale

Age and gender-based scale

Subsequent years 1/9 the money purchase

*Changes in assumptions for the year ended December 31, 2023 from the year ended December 31, 2022

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

5. Pension obligations (continued):

The investment return is net of all investment and administrative expenses.

The changes in actuarial assumptions for the years ended December 31 resulted in the following gains to the pension obligations:

The Plan's future experience will inevitably differ, perhaps significantly, from these assumptions. Any differences between the actuarial assumptions and future experience will emerge as gains or losses in future valuations and may materially affect the financial position of the Plan. The following sensitivity analysis demonstrates the effects of changes in assumptions on the pension obligations.

The net gain from Plan amendment/programming change of $3,509,401 results from APEX plan amendments made to align with LAPP plan changes effective January 1, 2024. The amendment removed a LAPP pop up death benefit that had previously been payable if a member's Pension partner passes away before the member.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements Year ended December 31, 2023

6.

Investment income and change in fair value:

Investment income and change in fair value is comprised of the following:

7. Benefit payments and transfers:

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

8. Administrative expenses:

9. Related party transactions:

The Plan's Governance Board consists of five members, who are appointed by the Board of Directors of ABmunis.

Alberta Municipal Services Corporation ("AMSC") is under common management with APEX and is therefore a related party.

The following balances are outstanding with related parties as at December 31:

Included in accounts receivable, due

The following transactions with the related parties occurred during the year ended December 31:

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

10. Capital risk management:

The main objective of the Plan is to provide Plan members with supplemental retirement benefits. To achieve this objective and meet the pension obligations of the Plan, it must sustain a certain level of net assets available for benefits.

The Plan seeks to fulfill its pension obligations by adhering to a funding policy which guides the actions of the Governance Board based on the Plan’s funding level. To ensure that the assets of the Plan are prudently invested, the Governance Board also endeavours to economically design an investment structure whereby its assets are allocated to optimize the risk/reward relationship of the excess return over going concern liabilities. This investment structure is reflected in the Plan’s Statement of Investment Policy and Goals (the "SIP&G") which is reviewed annually by the Governance Board and by ABmunis, the Plan’s Sponsor. As at December 31, 2023 and 2022, the Plan is in compliance with its SIP&G.

The Plan is required to file audited financial statements with the Government of Alberta, Ministry of Finance within 180 days after the Plan year end.

11. Financial instruments:

(a) Fair value:

The fair values of investments are determined as described in note 3(e). The fair values of other financial assets and liabilities, such as accounts receivable, contributions receivable and accounts payable and accrued liabilities approximate their carrying values due to the short-term nature of these financial instruments.

Fair value measurements recognized in the statement of net assets available for benefits are categorized into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table details the classification of investments in the fair value hierarchy.

During the year ended December 31, 2023, $604,803 was transferred from level 2 to level 3 as a result of rebalancing the investment portfolio per internal policies (2022 - $1,310,019).

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

11. Financial instruments (continued):

(b) Associated risks:

(i) Market risk:

Market risk is the risk of adverse financial impact as a consequence of market movements such as currency exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of the assets held and the value of liabilities. As all of the Plan’s financial instruments are carried at fair value with fair value changes recognized in the statement of changes in net assets available for benefits, all changes in market conditions will directly affect the change in net assets available for benefits. Market risk is managed through construction of a diversified portfolio of instruments traded on various markets and across various industries.

The Plan’s investments in equity funds, which include global equity funds, global equity low volatility funds, diversified growth funds, emerging markets equity funds, and global equity small cap funds, are sensitive to market fluctuations. A $1 change in the unit price of the equity funds would change the fair value by $3,443,918 (2022 - $3,308,530).

(ii) Liquidity risk:

Liquidity risk is the risk that the Plan cannot meet its obligations as they become due. The Plan maintains a SIP&G, which contains asset mix guidelines which help to ensure the Plan is able to liquidate investments to meet its pension benefit or other obligations. The investments are held in pooled funds and the underlying debt and equity instruments are in liquid securities traded in public markets. Although market events could lead to some investments becoming illiquid and affecting the unit values of the funds, the diversity of the Plan’s portfolios should ensure that liquidity is available for benefit payments. The Plan also maintains cash for liquidity purposes and to pay accounts payable and accrued liabilities.

There has been no change to liquidity risk from the prior year.

(iii) Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. The underlying equity investments of the various equity funds are exchange traded, which reduces credit risk as counterparties are backed by an exchange clearing house. The underlying fixed income investments of the Plan’s long-term bond fund are primarily Canadian-issued instruments and are diversified among government 73% (2022 - 34%) and corporate 27% (2022 - 66%). The underlying properties of the Plan’s real estate fund are diversified by location and tenant-type; as well, investment in a single property is limited to 10% of overall holdings. In order to minimize the exposure to credit risk, a comprehensive investment strategy has been developed and described in SIP&G. There were no significant concentrations of credit risk in the portfolios in either 2023 or 2022

The maximum credit risk exposure as at December 31, 2023 is $568,079 (2022$835,282) and is comprised of contributions receivable and accounts receivable.

There has been no change to credit risk from the prior year.

APEX SUPPLEMENTARY PENSION PLAN

Notes to the Financial Statements

Year ended December 31, 2023

11. Financial instruments (continued):

(b) Associated risks (continued):

(iii) Interest rate risk:

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. To properly manage the Plan’s interest rate risk, appropriate guidelines on duration for the long-term bond fund are set and monitored. The Plan’s investment in the long-term bond fund is sensitive to interest rate movements. An immediate hypothetical 100 basis point or 1% increase in interest rates, with all other variables held constant, would impact fixed income investments by an estimated loss of $3,577,668 (2022 - $2,906,279).

12. Comparative information:

Certain comparative information has been reclassified to conform to the financial statement presentation adopted for the current year.