NOTE 19 – INSURANCE RECOVERIES ON IMPAIRMENT AND RELATED LOSSES DUE TO EARTHQUAKE

On November 14, 2016, we filed an initial insurance claim with our Insurer with respect to earthquake damage to our parking building adjacent to our Courtenay Central entertainment-themed center (“ETC”) in Wellington, New Zealand and to the ETC itself. Also, we filed a separate business interruption claim to recover lost profits as a result of the earthquake. As of December 31, 2016, we recorded a recoverable asset to the extent of our incurred losses that we deemed probable of recoverability under our insurance claim, consisting of the (i) written down carrying value of the damaged parking building and (ii) a significant portion of the derivative loss contingencies on demolition activities. We received an initial settlement from our Insurer in December 2016 amounting to $5.0 million (NZ$7.1 million). In April 2017, our insurance company concluded that our losses exceeded the earthquake coverage policy limit of $25.0 million (NZ$36.0 million) and thus paid a final settlement of US$20.0 million (NZ$28.9 million) in May 2017, taking us to the policy limit.

Over the course of assessing the total magnitude of earthquake damage up to the point of final insurance settlement, we determined our incurred losses and lost profits as follows:


Covered Risks	Basis for Allocation (Dollars in thousands)		Commentary	% Allocation	Allocation of Insurance Proceeds (Dollars in thousands)
Property damage	NZ$	44,808	Estimated replacement cost for Courtenay Central parking building, as determined by an independent construction cost consultant.	81%	NZ$	29,093
Demolition costs		7,276	Actual costs incurred and best estimates of remaining costs to complete the demolition activities of Courtenay Central parking building	13%		4,724
Business interruption		3,415	Estimated lost profits during the closure period relating to our various revenue-generating components within Courtenay Central ETC (including our cinema and property operations)	6%		2,217
Total	NZ$	55,499		100%	NZ$	36,034

As a result of the final settlement, we recorded total insurance gain of $10.7 million (NZ$14.8 million) during the quarter ended June 30, 2017, determined as follows:


		Recoverable Components
		Non-Operating Income						Operating Income
(mainly in New Zealand Dollars in thousands, unless otherwise stated)	f	Property Damage(1)		Demolition Costs(1)		Total		Business Interruption(2)		Grand Total
Insurance Proceed Allocation	A	$	29,093	$	4,724	$	33,817	$	2,217	$	36,034
Movements in Recoverable Components
Total expected incurred losses, November 30, 2016	B		14,246		8,500		22,746		--		22,746
Less: Casualty Losses recorded in 2016 Earnings(3) - in NZ$	C		(795)		(1,224)		(2,019)		--		(2,019)
- in US$	D	US$	(560)	US$	(861)	US$	(1,421)	US$	--	US$	(1,421)
Recoverable Assets, December 31, 2016(4)	E=B-C	$	13,451	$	7,276	$	20,727	$	--	$	20,727
Add: Upward changes in estimates and others	F		347		--		347		111		458
Net recoverable balances charged against proceeds	G=E+F		13,798		7,276		21,074		111		21,185
Casualty gain, recorded in 2017 Earnings- in NZ$	H=A-G	$	15,295	$	(2,552)	$	12,743	$	2,106	$	14,849
Casualty gain, recorded in 2017 Earnings - in US$	I	US$	11,063	US$	(1,846)	US$	9,217	US$	1,523	US$	10,740
Net Casualty gain for 2016 and 2017 Earnings - in US$	∑(D+I)	US$	10,503	US$	(2,707)	US$	7,796	US$	1,523	US$	9,319

(1) The net impact to 2017 earnings of $9.2 million (NZ$12.7 million) is recorded as “Casualty gain” in our Consolidated Statement of Operations.

(2) The impact to 2017 operating earnings of $1.5 million (NZ$2.1 million) is recorded as part of the applicable segment revenues in our Consolidated Statement of Operations.

(3) The casualty losses recorded in 2016 as a separate line in our Consolidated Statement of Operations is made up the following: (i) 5% deductible of $795,000 (NZ$560,000) calculated based on the estimated value of the insured damaged parking structure for insurance purposes, and (ii) $862,000 (NZ$1.2 million) of total estimated demolition costs was preliminarily assessed as expenses not reimbursable under our insurance policy and hence, we recorded in profit and loss.

(4) The recoverable asset of $9.5 million (NZ$13.6 million), net of advance payment of $5.0 million (NZ$7.1 million), as of December 31, 2016 was presented as part of “Other non-current assets” as the timing of the insurance claim receipt was not fixed nor reliably determinable as of the time of our initial assessment.