130 | Just Group PLC | Annual Report and Accounts 2024
INDEPENDENT AUDITORS’ REPORT continued to the members of Just Group plc
Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Valuation of insurance contract liabilities and reinsurance assets and liabilities – Implementation of IFRS 17: Judgements, new models and data flows, which was a key audit matter last year, is no longer included because IFRS 17 has been fully implemented as of 31 December 2023. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities (Group) Refer to Group Audit Committee Report, Accounting policy 1.7 Insurance contracts and note 22 Insurance contracts and related reinsurance. The inherent uncertainty involved in setting the assumptions used to determine the insurance liabilities represents a significant area of management judgement for which small changes in assumptions can result in material impacts to the valuation of these liabilities. As part of our consideration of the entire set of assumptions, we focused particularly on annuitant mortality assumptions, credit default risk assumptions and expense assumptions as these are considered the most significant and judgemental.
We performed the following audit procedures to test the valuation of insurance contract liabilities (including best estimate liabilities, risk adjustment and contractual service margin): • Tested the design and operating effectiveness of the controls in place over the determination of the insurance contract liabilities, including those relating to model inputs, model operation and extraction and consolidation of results from the actuarial model; • Tested the design and operating effectiveness of controls related to policyholder data used in the valuation of insurance contract liabilities; • For a sample, agreed policyholder data used in the actuarial models to source documentation; • Using our actuarial specialist team members, we applied our industry knowledge and experience to assess the appropriateness of the methodology, models and assumptions used against recognised actuarial practices. This included consideration of the reasonableness of assumptions against actual historical experience, and the appropriateness of any judgements applied, including if there was any indication of management bias; • Performed testing over the calculations in the liability cash flow model. This included testing of changes made during the year, risk-based audit procedures to independently test certain cashflows at regular intervals and testing of analysis of change in modelled results, to assess whether the model continues to operate as expected; • Tested the derivation of the current, new business and annual locked in discount rates used to discount the insurance contract liabilities; • Used the results of an independent PwC annual benchmarking survey of assumptions to further challenge the assumption setting process by comparing certain assumptions used relative to the Group’s industry peers (where available and applicable); and • Tested the disclosures made by management in the financial statements. Further details on the specific procedures performed over each of the identified key assumptions are included in the below sections of our Key Audit Matters. Based on the work performed and the evidence obtained, we consider the assumptions used for valuation of insurance contract liabilities to be appropriate.
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