Strategic Report Governance
Financial Statements
189
The value of contracts initially recognised in the year are explained in note 22(e). The change in estimates that adjust the CSM recognised in the estimate of present value of future cash flows and risk adjustment in 2024 of £(2)m (2023: £(200)m) and £72m (2023: £64m) respectively represent the reinsurers’ share of the equivalent gross changes of £72m (2023: £(292)m) and £20m (2023: £89m) respectively explained in note 22(c)(ii). (e) New insurance contracts issued and reinsurance contracts held The tables below present the CSM at point of inception of new contracts sold in the year together with CSM for the related reinsurance:
Year ended 31 December 2024 £m
Year ended 31 December 2023 £m
Note
Insurance contracts issued Insurance acquisition cash flows
3(b)
(215)
(183)
Estimate of present value of future cash outflows Estimate of present value of future cash inflows Estimates of net present value of cash flows
(5,466)
(3,580)
6,409
4,305
728
542
Risk adjustment
(290)
(162)
Contractual service margin
438
380
The amount recognised in the CSM represents the value of new business acquired in the period valued based on point of sale economic and non-economic assumptions. The estimate of present value of future cash outflows of £5,466m (2023: £3,580m) represents the present value of claims and maintenance expenses quantified at the discount rates applicable at date of inception of contracts. The expense loading is determined based on incremental marginal costs including overheads that are attributable to the new contracts signed in the current period and does not include costs which have been previously allocated to existing contracts in prior years. The increase reflects the increase in business sold in the year, with retirement income sales increasing from £4,305m in 2023 to £6,409m in 2024.
Year ended 31 December 2024
Year ended 31 December 2023
Originated with a positive CSM £m
Originated with a negative CSM £m
Originated with a positive CSM £m
Originated with a negative CSM £m
Total £m
Total £m
Reinsurance contracts ceded Estimate of present value of future cash outflows
(55)
(153)
(208)
(19)
(149)
(168)
Risk adjustment
104
128
232
31 12
100
131
Contractual service margin
49
(25)
24
(49)
(37)
New insurance contracts and reinsurance contracts ceded include the impact of DB Partner (funded-re) transactions as described in the Strategic report. (f) Contractual service margin run-off The following represents the current view of the run-off of the CSM after allowing for accretion.
Insurance contract liability £m
Net reinsurance £m
Net £m 71 74 78 83 82
31 December 2024 Within 1 year
86 89 93 98 97
(15) (15) (15) (15) (15) (78)
1–2 years 2–3 years 3–4 years 4–5 years
5–10 years 10–20 years 20–30 years Over 30 years
482 825 556 405
404 688 477 371
(137)
(79) (34)
Total
2,731
(403)
2,328
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