146 | Just Group PLC | Annual Report and Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1. MATERIAL ACCOUNTING POLICIES continued 1.3.2. Inputs used to determine best estimate and risk adjustment (IFRS 17 values) at date of transition for insurance and reinsurance contracts 1.3.2.1. Determination of best estimate and risk adjustment For insurance and reinsurance contracts where the fully retrospective approach has been adopted, the best estimate and risk adjustment components of fulfilment cash flows have been recognised and measured using the accounting policies set out in note 1.5 from the inception date of the contracts to the date of transition (1 January 2022). For insurance and reinsurance contracts where the fair value approach has been adopted, the best estimate and risk adjustment components of fulfilment cash flows have been determined as at 1 January 2022. The longevity assumptions used are consistent with the basis used in the Just Group plc Solvency and Financial Condition Report as at 31 December 2021. Mortality assumptions have been set by reference to appropriate standard mortality tables. These tables have been adjusted to reflect the future mortality experience of the policyholders, taking into account the medical and lifestyle evidence collected during the underwriting process, premium size, gender and the Group’s assessment of how this experience will develop in the future. The assessment takes into consideration relevant industry and population studies, published research materials, and management’s own industry experience. The standard tables which underpin the mortality assumptions are summarised in the table below for the relevant products of the Group’s insurance subsidiaries Just Retirement Limited (“JRL”) and Partnership Life Assurance Company Limited (“PLACL”).
Product group
Entity
Mortality tables
Individually underwritten Guaranteed Income for Life Solutions (“GIfL”) Individually underwritten Guaranteed Income for Life Solutions (“GIfL”)
JRL
Modified E and W Population mortality, with CMI 2019 model mortality improvements
PLACL
Modified E and W Population mortality, with CMI 2019 model mortality improvements
Defined Benefit (“DB”)
JRL
Modified E and W Population mortality, with CMI 2019 model mortality improvements for standard underwritten business; Reinsurer supplied tables underpinned by the Self-Administered Pension Scheme (“SAPS”) S1 tables, with modified CMI 2009 model mortality improvements for medically underwritten business Modified E and W Population mortality, with modified CMI 2019 model mortality improvements
Defined Benefit (“DB”)
PLACL
Care Plans (“Care”) and other annuity products
JRL/PLACL Modified PCMA/PCFA and with CMI 2019 model mortality improvements for Care Plans; Modified PCMA/PCFA or modified E and W Population mortality with CMI 2019 model mortality improvements for other annuity products
Protection
PLACL
TM/TF00 Select
The long-term improvement rates in the CMI 2019 model are 1.5% for males and 1.25% for females. The period smoothing parameter in the modified CMI 2019 model has been set to 7.00. The addition to initial rates (“A”) parameters in the model varies between 0% and 0.25% depending on product. All other CMI model parameters are the defaults. 1.3.2.2. Discount rates All cash flows were discounted using investment yield curves adjusted to allow for expected and unexpected credit risk (refer to note 1.5 and note 26(b). The overall reduction in yield to allow for the risk of defaults from all non-LTM assets (including gilts, corporate bonds, infrastructure loans, private placements and commercial mortgages) and the adjustment from LTMs, which included a combination of the NNEG guarantee and the additional reduction to future house price growth rate, was 61bps in JRL and 68bps in PLACL. The discount rates used to calculate the value of the best estimate and risk adjustment for the groups of contracts applying the fair value approach were determined based on a reference portfolio as at the transition date. The discount rates used for the determination of the fulfilment cash flows (and the locked-in rates for the contracts transitioning to IFRS 17 under the fair value approach) were:
JRL DB / GIfL
PLACL Care 0.8% 1.1% 1.0% 1.0% 0.9%
PLACL DB / GIfL
1 year 5 years 10 years 20 years 30 years
2.6% 3.0% 2.9% 2.8% 2.7%
2.7% 3.0% 2.9% 2.9% 2.8%
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