200 | Just Group PLC | Annual Report and Accounts 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
26. INSURANCE CONTRACTS AND RELATED REINSURANCE continued 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:
2022 (restated) £m
2023 £m
Insurance contracts issued Insurance acquisition cash flows
(183)
(124)
(3,580)
Estimate of present value of future cash outflows Estimate of present value of future cash inflows Estimates of net present value of cash flows
(2,797)
4,305
3,390
542
469
(162)
Risk adjustment
(149)
Contractual service margin
380
320
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. Insurance acquisition cash flows are deducted from CSM at point of sale and recognised in Insurance revenue and Insurance services expenses over the life of contracts. The total of £183m in 2023 increased compared with the prior year amount of £124m mainly reflecting growth in business volumes combined with higher investment acquisition costs as the Group has increased its investment in illiquid assets. The estimate of present value of future cash outflows of £3,580m (2022: £2,797m) 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 premiums receivable increasing from £3,390m in 2022 to £4,305m in 2023. 2023 2022 (restated)
Originated with a positive CSM £m
Originated with a negative CSM £m
Originated with a negative CSM £m
Total £m
Total £m
Reinsurance contracts ceded Estimate of present value of future net cash outflows
(19)
(149)
(168)
(165)
(165)
31 12
100
131
Risk adjustment
115
115
Contractual service margin
(49)
(37)
(50)
(50)
A negative reinsurance CSM reflect costs that will be incurred by the Group on entering into the reinsurance arrangement, whereas a positive CSM for reinsurance reflects when a gain is made on entering into a reinsurance contract. Under IFRS 17, reinsurance CSM can be either positive or negative at initial recognition, and then amortised over the life of the underlying contracts based on coverage units. During 2023 the Group broadened its use of reinsurers for new DB business which resulted in recognition of contracts with positive CSM.
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