Strategic Report | Governance | Financial Statements | 199
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued
Contractual service margin
Estimate of present value of future cash flows £m
Risk adjustment for non-financial
Contracts under FRA and GMM £m
Contracts under FVA £m
risk £m
Total £m 716
Year ended 31 December 2022 (restated)
Opening reinsurance contract asset Opening reinsurance contract liability
546
116 487 603
–
54
(803) (257)
32 32
119 173
(165)
Net opening balance
551
Changes in the statement of comprehensive income Changes that relate to current service CSM recognised for service received Change in risk adjustment for non-financial risk for risk expired
– –
–
(3)
(22)
(25)
(5)
–
–
(5)
Changes that relate to future service Contracts initially recognised in the period Change in estimates that adjust the CSM Net expenses from reinsurance contracts Net finance expenses from reinsurance contracts
(165)
115
50 40 87
–
– –
(61)
(35)
56 34
(226)
75
(30) (91)
182
(279) (204)
1
5
Total changes in the statement of comprehensive income
(44)
88
39
(121)
Cash flows Premiums paid Claims received Total cash flows
804
– – –
– – –
– – –
804
(579)
(579)
225 589
225 776
Closing reinsurance contract asset Closing reinsurance contract liability
80
32 88
75
(665)
319 399
137 212
(121)
Net closing balance
(76)
120
655
The changes that relate to current service in 2023 of £41m (2022: £30m) are explained in note 4. The value of contracts initially recognised in the year are explained in note 26(e).
The change in estimates that adjust the CSM recognised in the estimate of present value of future cash flows and risk adjustment in 2023 of £(200)m and £64m respectively represent the reinsurers’ share of the equivalent gross changes of £292m and £(89)m respectively explained in note 26(cii). Net finance income from reinsurance contracts of £108m (2022: £91m expenses) reflect the impact of changes in discount rates and unwinding of discounting. Accretion of the reinsurance CSM was £12m in 2023 compared with £6m in 2022, with the increase reflecting an additional year’s cohort and the upwards shape of the yield curve applying to the in-force business, as noted earlier for gross business.
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